Abstract: Mitt Romney has promised Americans that he will force China to "play by the rules." The Republican candidate, if he becomes president, may want to reconsider taking a hard-line approach to China.
Mitt Romney's views on China have come to the forefront over the last few days. Throughout the campaign, Romney has accused the Chinese government of using unfair tactics to keep its country's exports high and to entice companies to move jobs out of the United States and into China.
Romney has assured Americans that he will force China to "play by the rules." Recent media stories have hinted that the Republican candidate, if elected president, would not keep one of his key promises -- to label China as a "currency manipulator." Perhaps Romney should reconsider his entire China policy, as it contains some serious flaws.
Romney has accused China of engaging in a number of unfair economic practices, including currency manipulation, fraud, and theft of intellectual property. He asserts that China's policies have harmed U.S. companies and have cost many Americans their jobs. Romney is almost certainly correct in his assessment. Bloomberg News estimates that American job losses resulting from the U.S. trade deficit with China may be as high as 2.7 million.
The next president should work with China to correct these abuses. However, he will need to proceed carefully. For one thing, China plays a key role in keeping U.S. borrowing costs low. The country holds more than $1 trillion in American debt. At the same time, China is a key player in the world economy. If China's manufacturing sector were to slow down, it would negatively impact numerous countries, including the United States. Finally, many Americans benefit from the current status quo, which provides them with access to affordable goods.
Romney has stated that he will use sanctions, tariffs, and other harsh measures to pressure China to "play by the rules." If the Republican candidate becomes president and follows through on this promise, he might end up harming the U.S. economy instead of helping it. Romney's policies, if successful, could cause the Chinese economy to stall, thereby hurting the world economy. American families (especially those living near the poverty line) might also suffer, as the price of Chinese made goods would almost certainly increase. In the worst case scenario (however unlikely), China could retaliate by selling American bonds en masse and by refusing to buy more. Romney would then have a real crisis on his hands.
If he is elected president, Romney must pressure China to "play by the rules." However, he needs to proceed carefully. He cannot treat China too harshly, or he risks harming the U.S. economy instead of helping it.
-- Anthony Hopper
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