'Made in China'-Bad News for the USA

The "Made in China" tag now adorns a very large part of the goods imported into the USA.Cheap goods of every kind had kept the American consumer very happy until now.Suddenly he is jolted with the revelation that the toys he buys for his kids have dangerously high levels of lead, the foodstuffs and toothpaste are contaminated,the chopsticks are unclean and recycled after use and even the clothes that he buys have traces of hazardous chemicals.

The harm being done to the US consumer does not end here.China has combined a ruthless totalitarian political system with modern capitalistic tools to create an economic powerhouse.It enjoyed a trade surplus of about $230 billion with the US in 2006.In the first six months of 2007 the surplus is $117 billion.It has built up about $1.3 trillion in foreign exchange reserves and has had the courage to threaten the US that it had better behave otherwise it will dump its huge holding of US treasuries causing the US dollar to crash.The financial consequences of such an action for the US economy could be similar to a nuclear attack on its major cities.

So why does the US put up with all this from China?This is because US policy makers are living in a fools paradise.They think that if they continue to engage China in this manner it would lead to economic and ultimately political reform in that country.It is this obsession with political reform that has proved to be the undoing of the US right across Asia from Vietnam to Iraq and now China.The US would do well to understand that it will not be able to bring democracy to China in a hundred years.After that who cares!

The present economic policies being followed vis-a-vis China may have benefited a few corporations but have clearly harmed the nation as a whole.Large scale shifting of jobs to a country where they are performed in 'slave labor' conditions has caused a loss of US credibility as well.There is no longer any talk of Human Rights and so on.

China is now so confident that it thumbs its nose at the US when asked for simple economic reforms such as the revaluation of its currency, the yuan, which today is the most manipulated currency in the world.Although there have been four revaluations this year, they are nothing but minor adjustments and done only after China has ensured that they are not going to alter the situation on the ground.

In any case China enjoys such a huge cost advantage versus the US that even if it were to allow the yuan to rise considerably higher it would still be able to outsell any other country in the US.Then again the artificially sustained cost advantage ensures that China need not import any goods which it produces itself.It has built up huge production capacities to feed both the domestic and the export markets.It only needs to import essential raw materials and hi-tech items needed to improve quality and also to enhance the capabilities of its armed forces.

So it is time the US policy makers sat back and analyzed the benefits if any of its present policies."Made in China" may not be good news to the US for more reasons than one.