"The China Price" - The best business article I have seen in years.

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SouthAmerica: Americans shouldn’t criticize China because they use slave labor to produce some goods. Besides, if Americans want to bring up this subject to the Chinese then here are some facts to think about first.

The US population is around 300 million people.

China’s estimated population is around 1. 3 billion-people.

China has 5 times the number of people than the US.

The US has over 2.1 million people in prison today.

China has an estimated 1.7 million people in prison today.

China has 400 thousand less people in prison than the US, and at the same time China has 5 times the number of people of the US population.

The rate of incarceration in the US is 6 times higher than in China.

The proportion of people in prison in China compared with the number of people in the total population is very low in China - when compared with the same data for the United States.


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SouthAmerica: Here I will quote some information from my book published in December 1998 “The Real Promised Land.” In that book I have a chapter about 80 pages long regarding the prison system in the United States.

Today, Americans can buy just about anything that you can imagine made inside US prisons scattered all over the United States, and they make these goods, and provide services to governments, and corporations using slave labor as follows:

(note: I did an extensive study on the prison industry in the United States in 1998 when I was doing research for my book, and since then the number of inmates working as slave labor in the United States has increased many times.)


“When a country adopts the growth of its prison system as a fundamental tool for its “national economic development policy,” such as in the United States today, remember studies have shown that for each inmate incarcerated you are starting a cycle that usually takes seven generations of people to break it. The other very important thing to keep in mind is that if you do not treat this people reasonable well when they are in prison, the harshly you treat them when they are incarcerated the more violent they are when they are finally released. (Today, the United States is planting the seeds - its prison system; for a very violent society in the future.)

…There is no free lunch or simplistic solutions here. Every time society decides to send a person to prison, society is making a very large investment of its scarce resources. The money spent on building and running prison systems now exceeds that allocated to higher education in many states in the USA. The Federal government and most states are presently engaged in a building program that will add a large amount of new prisons to their current inventory, and the budgetary allocations for incarceration will only increase.

…Since the early 1970’s the United States have been incarcerating people by the hundreds of thousands, but a large number of these inmates will be completing their sentences in the prison system, and they will be released from this living hell. The problem is that for one reason or another most of them have been treated very harshly when in prison, and they are not a bunch of happy campers. They are a bunch of very angry people, and they will be ready to retaliate at the society that treated them so badly. The result will be a large increase in violent crime around the country in the coming years. One doesn’t need to be a rocket scientist to figure that one out. (It is a myth that all prisons in the USA are like country clubs. That kind of thinking it is just pure BS, and is used to justify the hash treatment of current inmates in the USA.)

The United States imprisons more people than any other country in the world; today, over 2 million Americans are behind bars in federal, state or local custody. That’s a half-million more prisoners than China, which has nearly five times our population. The U.S. incarceration rate is now 672 inmates per 100,000 U.S. residents, a rate higher than any other country except Russia. That’s a rate six to 10 times the rate of most European countries, which also enjoy lower crime rates. This enormous prison population in the USA represents a huge pool of cheap labor that directly threatens the wages and conditions of those of us who work on the outside of prison walls.

…Capitalism is not a moral system. Capitalism is about making money. Does not matter how you make it. The name of the game is making a profit. Slavery works well under a capitalist system. Prostitution works well under capitalism. Prison labor, a modern form of slavery, works well under capitalism.

Let me quote from the New Jersey State official government website in the internet at the following address: http://www.state.nj.us/deptcor/index "Inmate labor in New Jersey and around the country is a significant and growing resource. We manufacture over 1,500 products for sale to any tax-supported institution or agency inside and outside the state.


Page 221

To find out more about what we make in New Jersey's correctional facilities, click on any of the major product category listings.

1) Furniture
2) Signs
3) Janitorial Equipment
4) Clothing
5) Printing
6) License Plates
7) Baked Goods
8) Services"

"Society is now witnessing a resurgence of interest in prison industries. The expansion of prison industries is appealing to elected officials and policy makers partly because of the rising costs of incarceration and declining state and federal budgets. Currently there are more than twenty-six prison-based industries in over ten states across a variety of institutions from community-based to maximum-security facilities.

...These small businesses sell their products and services on the open market to private sector customers. The types of products and services include cloth bags, data processing, vinyl products, and ceramics. ...Large companies are not generally found in this model, but the Howard Johnson and Best Western motel chains are exceptions. They hire prisoners to serve as reservation clerks and in other service positions. ...During prime tourist season, especially on holidays and weekends, inmate labor is useful to these types of business establishments."37

Americans are using inmate labor in New Jersey and around the country. Remember the newspaper article of The Jackson Sun, which I mentioned before, which was included with the investment materials sent by Corrections Corporation of America. I quote again from that article; "Some prisoners will help the community, said Allen Burgery, warden at the new prison. Model prisoners will work on road crews, making 17 to 55 cents an hour, saving the city manpower and money." (do not forget in the United States you have to be politically correct and do not refer to this type of labor as "Slave Labor". Use instead the more palatable, and acceptable term "Inmate Labor")

Remember the inmates are not being used as "Slave Labor", since they are being so humane and paying them the current labor market rate in Tennessee of 17 cents and 55 cents an hour. I guess the federal law regarding minimum wage does not apply when applied to the current crop of slaves or inmates.

The next logical step is for banks and credit card companies to start a prison for debtors. Then they also can pay the people in prison 17 cents and 55 cents an hour for doing all kinds of customer service for these companies.


Page 222

On August 9, 1998 "The Star-Ledger" a major newspaper in New Jersey run a story saying; "Companies tap a wealth of prison labor" with low unemployment and plenty of work, nation's inmates prove to be a cheap resource. ...some people are begging Congress to unlock this million-man labor pool.

Among them are conservative Republicans like Edwin Meese II, who served as attorney general during the Reagan administration. Meese is now chairman of The Enterprise Prison Institute, a for-profit group in McLean, Va., that is pushing for greater access to prison labor.

A bill pending in Congress would grant exactly that, repealing restrictions on the use of prison labor that have been on the books since Franklin D. Roosevelt was president.

The article also mentioned and gave the example of an inmate making $ 6.00 per hour for his work, after taxes and other required deductions, he gets to keep $ 1.20. Should we call this inmate labor or a more accurate description of "Slave labor"?

There is another price to pay, because illegal drugs business are made so profitable for the drug dealers, the criminal gangs are moving all over the country instead of staying only in the big cities. They are expanding their business to the suburbs and to all communities around the country. The drug distribution network will follow you does not matter how far and safe you think you are from the drug problem.

This is the problem when your goal as a society is social perfection. The choice is not between perfection and social imperfection. The choice is a benefit/cost analysis between how much problem society have if drugs are legal and how much problem and cost society is willing to pay to keep drugs illegal. Does not matter how you look at it, the truth is there is no perfect world. We never had a perfect world in the past, and we will never have one in the future.


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….The mood and temper of the public in regard to the treatment of crime and criminals is one of the most unfailing tests of the civilization of any country. A calm, dispassionate recognition of the rights of the accused, and even of the convicted criminal . . .measure the stored-up strength of a nation and is sign and proof of the living virtue in it.

“Distrust all in whom the impulse to punish is powerful.”
- Friedrich Wilhelm Nietzsche

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SouthAmerica: Here is an article published by The Financial Times of London on April 24, 2005 that the Bush Administration including “Treasury Secretary John Snow Job” probably has missed.


“China's alternative to revaluation”
By Lawrence Lau and Joseph Stiglitz
Published: April 24 2005
The Financial Times of London


Western pressure has been mounting on China to revalue the renminbi, from hardening rhetoric in the US Congress to recent calls by the Group of Seven leading industrialized nations for more flexibility from China. However, there is currently no credible evidence that the renminbi is significantly undervalued, and an adjustment in its exchange rate at this time is neither warranted nor in the best interests of China or global economic stability.

The two symptoms of under valuation are a large multilateral trade surplus or high inflation. China's measured trade balance has been in slight surplus (a surplus no doubt exaggerated by over-invoicing of exports and under-invoicing of imports); but with the volatility of oil prices and the international economy more generally, this could quickly be reversed. And while China's trade surplus has grown, China's multilateral surplus is far from the world's largest.

America blames China for the bilateral trade deficit; but America's trade deficits are a result of its huge fiscal deficits and the fact that Americans simply do not save. America's defense that it is doing the world a service by consuming vastly beyond its means is self-serving and rings hollow: US fiscal policies and low savings have become the fundamental source of global imbalances.

China has experienced large capital inflows (beyond foreign direct investment), but these are symptoms of speculative pressures that have been so destabilizing throughout the developing world. It would be a mistake - and only a temporary palliative - to reward the speculators by appreciating the currency.

Some in China would revalue the currency not because they believe there is a fundamental economic problem, but to get the Bush administration off their backs. But currency appreciation is not likely to reduce significantly the US balance of payments deficit with China or the world. Because the prices China pays for imports would be lowered, and because of the high import content of China's exports to America - as much as 70-80 per cent - even a 10 per cent revaluation would have miniscule effects. Moreover, China should receive some comfort from having joined the World Trade Organization: there are the beginnings of an international rule of law. A unilateral imposition by the US of import duties would most likely contravene WTO rules; it is hard to call a country that has adopted a fixed exchange rate system a currency manipulator.

If China were to contemplate a revaluation, it should consider as an alternative the imposition of a tax on its exports. Export taxes are generally permitted under WTO rules. Indeed, China has already moved in a limited way in this direction on textiles. There are several reasons voluntary imposition of a tax on its exports may be preferable to a renminbi revaluation. Both would have similar effects on Chinese exports - they would make them appear more expensive to the rest of the world. Because of this similarity, an export tax would provide an empirical answer to the question of whether a revaluation would work. But it would do this without some of the significant costs attendant on revaluation.

One of the advantages of an export tax is that, unlike a revaluation, it would not lead to financial losses for Chinese holders of dollar-denominated assets, such as the People's Bank of China or commercial banks and enterprises. China's central bank currently holds about $640bn in foreign exchange reserves. Assume that only 75 per cent is held in dollar-denominated assets. A renminbi revaluation of 10 per cent would result in a loss of $48bn or about 400bn yuan for the central bank.

Another cost of revaluation would be possible further deterioration in the distribution of income, including increasing the already large rural-urban wage gap. Revaluation would put downward pressure on domestic Chinese agricultural prices; an export tax would not. An export tax, by contrast, would have a beneficial side effect: it could generate substantial government revenue for China. Given the high import content of Chinese exports to the US, a 5 per cent export duty would be equivalent to a currency revaluation of some 15-25 per cent, generating about $30bn-$42bn a year.

Finally, an export tax would not reward currency speculators. It may even discourage the speculation that has complicated macro-economic management of China's economy. If potential speculators can be convinced that China would rather impose an export tax than revalue, less "hot money" will flow into China. By contrast, nothing encourages speculators more than a "victory", especially where, as here, it is likely to do little to correct the underlying problems.

An export tax can be easily lifted if and when Chinese balance of payments conditions so warrant. It could be stipulated that the tax would be reduced or lifted if the Chinese current account balance turned significantly negative. America's China policy has been driven more by domestic politics than hard economic reasoning or thoughtful, quiet diplomatic initiatives.

It would be better for the world if the international rule of law prevailed - and within those rules, China could unilaterally impose an export tax, while it is dubious whether America could impose an import duty. Most importantly, we should not let bad politics drive out good economics.

Lawrence Lau is professor of economic development at Stanford University and vice-chancellor at the Chinese University of Hong Kong; Joseph Stiglitz is University Professor at Columbia University and Nobel laureate in economics

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SouthAmerica: Here is the new reality in United States and Brazilian international relations. "Basically, the United States is becoming irrelevant from the Brazilian perspective." Here is my latest article regarding this subject. The article was also published on various newspapers around the world.

“While China Rises the U.S. Falls in Brazil and Latin America”
Written by: Ricardo C. Amaral
Thursday, 02 June 2005

http://www.brazzil.com/content/view/9296/76/


In a nutshell: The future looks great for Brazil, and the Brazilian people.

Most Americans are surprised by what I have been writing about, or by what I have to say on regular conversation, but Brazil and most of South America for that matter are disconnecting from the United States today.

China is replacing the United States as the main business partner for Brazil and most countries in South America. This transformation is happening at the speed of light, and most Americans don’t have any idea of what is going on in that part of the world; since Americans are too busy fighting in Iraq, in Afghanistan, and destroying the American economic system that we used to have in the United States.

There are many reasons why this American loss of influence is happening, and did not start with September 11, 2001. This has been going on for a number of years, since the collapse of the Soviet Union.

Today, China is becoming more important to the Brazilian economy than the United States in all sorts of areas. From the Brazilian perspective the United States represents the past, and China the future. “Basically, today the United States is becoming irrelevant from the Brazilian perspective.”

Today, the United States has lost legitimacy and influence in many parts of the world, but the US is losing influence at a fast rate in most countries of South America, including in Brazil.

I can speak from personal experience regarding the US decline in terms of Brazil. In 1988 when I was a controller for a major Brazilian international trading company in New Jersey, (our office was located right next to the George Washington Bridge that connects New Jersey with New York City) our outside auditors had twenty-two other Brazilian companies as their clients in the New York metropolitan area. By the year 2000 that same auditing firm had only one Brazilian client left in the New York City Metropolitan area – a small office of Petrobras.

The Petrobras Company (a major company in Brazil) was one of their major Brazilian clients at the time in New York City. In 1986 Petrobras had over 100 people working on its office in New York City. Today they have about three people working in that office. Most of the other twenty-two Brazilian company clients of our outside auditors closed their offices in New York City, and they no longer operate in the United States.

During the years 1986 and 2000 when I was working in companies doing international trade, I saw first hand a number of Brazilian companies one by one going out of business and closing its US operations – not only international trading companies but also Brazilian banks, shipping companies and so on….

There were other factors that merged during that time that also helped explain for this amazing exodus of Brazilian companies from the US market such as: economic turmoil in Brazil, merger and acquisitions among Brazilian companies, innovation and technological advances during that time made many of these companies obsolete, and since 1991 with the fall of the Soviet Union Americans lost its interest in Brazil and Latin America in general, and American attention shifted to other parts of the world.


Here is another example:


Most Americans never heard of Jose Bonifacio de Andrada e Silva. He is the most important man in Brazilian history. He was responsible for Brazilian independence, and for keeping Brazil together as one country. He was responsible for stopping Brazil from splitting into various countries at the time of independence, as the Spanish Empire did in South America. Without Jose Bonifacio in Brazilian history, we would have five or six independent countries, instead of having the country Brazil as we have today. (I am a descendent of Jose Bonifacio de Andrada e Silva, and of his younger brother Martin Francisco who also played an important role in Brazilian independence. Martin Francisco is equivalent to Thomas Jefferson in American history. Martin Francisco wrote the document "Declaration of Independence of Brazil."

Every September 7, the Brazilian government has a ceremony to commemorate Brazilian independence at the statue of my ancestor Jose Bonifacio de Andrada e Silva. The statue is located at Bryant Park on Avenue of the Americas and 41st St. in New York City.

Every year that event it is attended by about 20 cadets of West Point who participate in the ceremony and a number of ambassadors of various countries from the Americas and around 250 other guests. Usually the ambassadors of Uruguay, Argentina, Bolivia, Colombia and ambassadors of other countries are also present to the ceremony.

I have been going to this ceremony for many years to represent my family. Last year besides the Brazilian Ambassador, I was the keynote speaker in that event. One thing called my attention in the last years' ceremony. Besides the usual ambassadors of South American countries, the Ambassador of Angola, and the Chinese Ambassador also were present. I know that China is becoming an important partner for Brazil, but the presence of the Chinese Ambassador to that ceremony confirmed what I already knew.

Basically, the United States is becoming irrelevant from the Brazilian perspective. I know for a fact that Americans are losing their grasp on what is going in many areas around the world, but the US is especially losing very fast its influence in South America. For a number of years now, in foreign policy the US has been looking like amateurs.

Another example: I spent one year (2001-2002) trying to start a nonprofit organization called “The Brazilian Cultural Society.” - part of the project also included a center for Brazilian history and economic studies. I had a half dozen meeting with senior management of Fairleigh Dickinson University in New Jersey, and that university was very interested in helping me get the project off the ground.

The center was to be located at the university campus in Teaneck NJ. I had many meetings with senior management of FDU University in Teaneck, NJ, but even with the help of the university's vice president of fund-raising we were not able to find anyone willing to fund that project. We almost got the project off the ground, but then came the September 11 attack, and that created a major problem for us, since all sources of funding did dry up for a long time. (I also did send proposals to a large number of other potential funding sources in the United States.)

Fairleigh Dickinson University (FDU) was an ideal place for this Center of Brazilian History and Economic Studies, since I graduated with a B.A. in Economics and MBA in Finance from FDU, and I am an alumni of the University. There were other reasons also to locate the new center at the FDU campus. FDU's new president, J. Michael Adams, understands the importance of learning about other cultures, and he is a heavy supporter of FDU's strong international programs. He believes each student should have an international experience. There's been an acknowledgment at FDU that the University has a responsibility to prepare the students with a global outlook.

In the meantime, I was able to put together a powerful group of people who had accepted to be members of the board of trustees of the new organization, including:

1) Nélida Pinõn. She is a world-renowned Brazilian intellectual and one of Brazil's most important contemporary novelists. She also has been a former president of the Brazilian Academy of Letters.

2) Professor Gregory Rabassa. American translator who was largely responsible for bringing the fiction of contemporary Latin America to the English-speaking world. Of his more than 30 translations from Spanish and Portuguese, perhaps the best known is Gabriel Garcia Marquez's One Hundred Years of Solitude (1970).

3) Professor Carlos Guilherme Mota. One of the most important Brazilian historians today. He is a prolific writer and has published a long list of history books.

4) Former President of Brazil Senator José Sarney was the latest person to accept an invitation to become a member of the board of directors of the Brazilian Cultural Society. Today Senator Sarney is the president of the Senate, and the most influential senator in Brazil.

When I say that the United States is losing very fast its influence in Brazil, I am not saying that just as a possible theory. It is a fact, and I have been witnessing Brazil disconnect from the United States over a period of many years. I have first hand personal experiences and have witnessed this fast moving American influence decline.

What it is amazing to me is the American lack of foresight, since Brazil is one of the new rising economic powers of the 21st century – Brazil is part of this new exclusive group of countries that also include: Russia, India, and China - (BRIC’s).

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“A Rising China Counters U.S. Clout in Africa”
By Abraham McLaughlin - Staff writer of The Christian Science Monitor
March 30, 2005


HARARE, ZIMBABWE – The Chinese economic juggernaut and its thirst for minerals and markets has increasingly brought it to Africa, including here to Zimbabwe. The fertile hills of this Southern African nation are rich with gold and the world's second-largest platinum reserves. In Sudan, Angola, and along the Gulf of Guinea, the Asian giant is guzzling the continent's vast oil supply.

But lately the Chinese are digging on a different front, one that could complicate the Bush administration's efforts to promote democracy here: African politics.

Last year, China stymied US efforts to levy sanctions on Sudan, which supplies nearly 5 percent of China's oil and where the US says genocide has occurred in its Darfur region. And as Zimbabwe becomes more isolated from the West, China has sent crates of T-shirts for ruling-party supporters who will vote in Thursday's parliamentary elections.

In addition, China or its businesses have reportedly:

• provided a radio-jamming device for a military base outside the capital, preventing independent stations from balancing state-controlled media during the election campaign;

• begun to deliver 12 fighter jets and 100 trucks to Zimbabwe's Army amid a Western arms embargo; and

• designed President Robert Mugabe's new 25-bedroom mansion, complete with helipad. The cobalt-blue tiles for its swooping roof, which echoes Beijing's Forbidden City, were a Chinese gift.
China is increasingly making its presence felt on the continent - from building roads in Kenya and Rwanda to increasing trade with Uganda and South Africa. But critics say its involvement in politics could help prop up questionable regimes, like Mr. Mugabe's increasingly autocratic 25-year reign.

"Suffering under the effects of international isolation, Zimbabwe has looked to new partners, including China, who won't attach conditions, such as economic and political reform" to their support, says a Western diplomat here. Of China's influence on this week's elections, he adds, "I find it hard to believe the Chinese would push hard for free and fair elections - it's not the standard they're known for."

Indeed, Mugabe often praises China and Asia as part of his new "Look East" policy. He responded to tough questions from an interviewer on Britain's Sky News last year about building his $9 million new home, while millions of Zimbabweans live on the verge of starvation, by saying: "You say it's lavish because it is attractive. It has Chinese roofing material, which makes it very beautiful, but it was donated to us. The Chinese are our good friends, you see."

China is becoming good friends to many African nations, as the US has been. Between 2002 and 2003, China-Africa trade jumped 50 percent, to $18.5 billion, Chinese officials say. It's expected to grow to $30 billion by 2006. US-Africa trade was $44.5 billion last year, according to the Commerce Department. As the world's largest oil importer behind the US, China has oil interests in Sudan, Chad, Nigeria, Angola, and Gabon. The US is also hunting for oil in Africa, with about 10 percent of imports coming from the continent.

Not all of China's activities in Africa are controversial. Under the auspices of the UN, the China-Africa Business Council opened this month, headquartered in China, to boost trade and development. It has peacekeepers in Liberia and has contributed to construction projects in Ethiopia, Tanzania, and Zambia, though critics say it is using these projects to garner goodwill that it can tap into during prickly issues like Taiwan's independence or UN face-offs with the US.

Here in Zimbabwe, China also may be helping to support one of Africa's more oppressive regimes. The radio-jamming equipment that has prevented the independent Short Wave Radio Africa from broadcasting into the country is Chinese, according to the US-funded International Broadcast Bureau.

Reporters Without Borders, a group dedicated to freedom of the press, based in Paris, had this to say about the jamming: "Thanks to support from China, which exports its repressive expertise, Robert Mugabe's government has yet again just proved itself to be one of the most active predators of press freedom."

A Chinese diplomat here insists the equipment didn't come from China. And he says the T-shirts, which reportedly arrived on Air Zimbabwe's new direct flight from Beijing, were "purely a business transaction." But he adds that China-Zimbabwe relations have recently "been cemented in the field of politics and business."

In return for its support, China has received diplomatic backing on Taiwan's independence, as it has from many African nations.

Ultimately, China's expansion into Zimbabwe and Africa is more narrow than the 1800s colonization by European powers, when "Christianity, civilization, and commerce" were the buzzwords. For China, it's all about economics. "They've said: 'If you agree to privatize and sell to us your railways, your electricity generation, etc. - we will come in with capital," says John Robertson, an economist based in Harare.

With an economy that has shrunk as much as 40 percent in five years, Zimbabwe's government uses these promises to put off critics. "The government says, 'The Chinese are coming, and they'll bring in billions of dollars in investment, and soon everything will be fully restored,' " Mr. Robertson says.

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Libertad: question

SouthAmerica...

What do you think about CAFTA ?


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SouthAmerica: The US economy will lose even more jobs because of CAFTA.

The US is in the middle of a race to the bottom, and CAFTA will help Americans move a few notches down.

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June 23, 2005

SouthAmerica: On June 11, 2005 I posted an article by Lawrence Lau and Joseph Stiglitz (See the article on prior page) that maybe Alan Greenspan was the only one to read that article from all these US government officials.

I said the following on 6/11/05 - SouthAmerica: Here is an article published by The Financial Times of London on April 24, 2005 that the Bush Administration including “Treasury Secretary John Snow Job” probably has missed.

“China's alternative to revaluation”
By Lawrence Lau and Joseph Stiglitz
Published: April 24 2005
The Financial Times of London



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The Financial Times of London should send a copy of Dr. Joseph Stiglitz article to the US Congress, to Alan Greenspan, and to the members of the Bush Administration before they make a mess of everything regarding China.

By the way, if I were the Chinese I would announce and I would stop immediately investing any money on US government securities until the Bush Administration decides on what kind of actions they are going to implement regarding China.


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“Anti-China tariff futile: Greenspan”
By BARRIE MCKENNA
Thursday, June 23, 2005
Globe and Mail

Alan Greenspan warned an angry U.S. Congress yesterday that efforts to strong-arm China into floating its currency are misguided, futile and dangerous.

The Federal Reserve Board chairman said yesterday that a proposed 27.5-per-cent tariff on Chinese imports would kill, rather than save, jobs at home, while sending an ominous message to the world that the United States only wants one-way free trade.

“A policy to dismantle the global trading system in a misguided effort to protect jobs from competition would [be] to the eventual detriment of all U.S. job seekers, as well as millions of American consumers,” Mr. Greenspan told the Senate finance committee.

There's no “credible evidence” that increasing the value of the Chinese yuan would boost U.S. factory jobs or manufacturing activity, he added.
But the Fed chief's rejection of sanctions failed to quell growing anger among senators over the U.S. trade deficit with China, which continues to expand after hitting a record $162-billion (U.S.) last year.

Senators became increasingly frustrated as they repeatedly asked Mr. Greenspan and U.S. Treasury Secretary John Snow what to do about an expanding list of grievances, including alleged currency manipulation, intellectual property piracy and now this week's controversial bid by Chinese state-run oil firm CNOOC Ltd. to buy U.S. oil producer Unocal Corp.

The proposed 27.5-per-cent tariff on all Chinese imports is among more than half a dozen bills introduced in Congress that target various Chinese trade practices.

Mr. Greenspan and Mr. Snow offered few options of their own, beyond diplomacy. Mr. Greenspan acknowledged that it's in the best interest of China and the world for the yuan to rise in value. He suggested working through the World Trade Organization dispute settlement process to deal with complaints about unfair trade.

Mr. Snow said he understands the frustration of Congress. But he said sanctions now would undermine diplomatic efforts to get the Chinese to revalue their currency.

“We're not satisfied and we've made the [Chinese] aware that it's time to move,” Mr. Snow said.

If the Chinese fail to act within the next several months, Mr. Snow said the Bush administration would have no choice but to officially designate China a currency manipulator, a move that could eventually lead to sanctions.

China has kept its currency pegged to the U.S. dollar since 1995 at a rate of about 8.3 yuan to the dollar, in spite of a decade of rapid economic growth. U.S. manufacturers have complained that the exchange gives China an unfair advantage in the market.

In spite of official objections, the China tariff bill enjoys broad support in both the Senate and the House of Representatives. New York Democrat Charles Schumer, the bill's co-sponsor, has suggested it could clear both houses of Congress by September. That would force President George W. Bush either to sign it into law or use his veto.

If passed, the bill would impose a blanket 27.5-per-cent tariff on all Chinese imports until the country agrees to float its currency.

During often heated exchanges with Mr. Greenspan and Mr. Snow, several senators characterized the Bush administration's efforts to get China to move to boost the value of the yuan as “a joke.”

“Being a free trader is not synonymous with being a sucker,” complained Oregon Democrat Ron Wyden.

New York's Mr. Schumer said the Bush administration's handling of the yuan problem amounts to “begging.” It's time to get much tougher, he said.

In a sign of the growing anti-China sentiment in Congress, committee chairman Charles Grassley was the only senator to oppose tough sanctions against China.

“We cannot afford to act rashly and get it wrong,” Mr. Grassley said.

Mr. Greenspan suggested that Congress is futilely trying to reverse the process of globalization, which has been a boon to the U.S. economy and the rest of the world.

He pointed out that raising the value of the yuan would do little to cut the U.S. trade deficit because other Asian countries would quickly fill the void left by China. Likewise, a tariff on Chinese goods would simply push U.S. consumers to buy cheap textiles, computers and toys from other Asian countries and Latin America, he said.

Peter Morici, a business professor at the University of Maryland, said the administration has embraced a “policy of appeasement” with China on the yuan.

“This is politics more than economics,” Prof. Morici said. “President Bush has been unwilling to take on China on a variety of issues — currency is just one.”


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SouthAmerica -

You seem to have a good handle on world economies. What do you think of the following:

In the June 4, 2005 edition of The Economist, it tells the Chinese purchased more than 5 million cars last year compared to the 17 million purchased by Americans. The article goes on to say that next year they will surpass Japan to become the # 2 buyer of automobiles. Furthermore in just a few years they may be buying as many as five times the autos that Americans do and consume as much as oil as we currently do in half a decade.

And we think gas is high now.

According to the most recent US Geological Survey (done in 2000)http://pubs.usgs.gov/dds/dds-060/
there are 3000 billion barrels of oil left in the world. Total oil production in 2000 was 25 billion barrels. If oil consumption increases on average 1.4% (this does not consider the Chinese growth) the world's oil supply will not be exhausted until 2056. When you factor in their new appetite for cars, our oil supply could be gone in 15 to 30 years instead of the 50 projected. (I'll guess more like 25 to 30).

This post doesn't sound like it but I'm about as hopeful thinking a person as there is.

Still, sometimes I think about a world without oil, no oil for 18 wheelers, no oil for jets, no oil for construction equipment nor ambulances.

When that day comes (whenever it is) we may or may not have developed a renewable source of energy. The internet will be more important. Maybe doctor exams will all be done at home again --- online.

One thing is sure, we live in exciting times. The next 50 years will see changes that make the past changes seem small
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Renewable Energy

Renewable energy will not take hold until it can be confirmed that the price of oil will not violate certain levels...

Oil prices need to show that they are not coming down...for sure...or investing in the infrastructure by ¨for profit¨will not happen...

This catch 22 situation is that....

Alternatives entry will force oil prices down...and when oil
prices are down...alternatives are not profitable...

In other words...as long as there is somewhat adequate oil supplies....alternatives face an uphill battle against reasonable profitability....

Solution:

Eliminate legal largesse such as from the Spitzer´s of the world...and the built in cronyism amongst the legal firms which have the free for all by both regulating and defending rights...
Solution: Prosecute individuals...not companies...

Eliminate the IRS substituted by a consumption tax...as agreed upon by Milton Freidman...

Tax oil...and do not tax alternative energy....let alternative energy operate in a tax free world...

Will this happen....???

Look US labor will never equilibrate to China and other similar labor situations...

Yeah....after the US becomes IMF dependent ....
 
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Birdman wrote: SouthAmerica -

You seem to have a good handle on world economies. What do you think of the following:

In the June 4, 2005 edition of The Economist, it tells the Chinese purchased more than 5 million cars last year compared to the 17 million purchased by Americans. The article goes on to say that next year they will surpass Japan to become the # 2 buyer of automobiles. Furthermore in just a few years they may be buying as many as five times the autos that Americans do and consume as much as oil as we currently do in half a decade.

And we think gas is high now.

According to the most recent US Geological Survey (done in 2000)http://pubs.usgs.gov/dds/dds-060/
there are 3000 billion barrels of oil left in the world. Total oil production in 2000 was 25 billion barrels. If oil consumption increases on average 1.4% (this does not consider the Chinese growth) the world's oil supply will not be exhausted until 2056. When you factor in their new appetite for cars, our oil supply could be gone in 15 to 30 years instead of the 50 projected. (I'll guess more like 25 to 30).

This post doesn't sound like it but I'm about as hopeful thinking a person as there is.

Still, sometimes I think about a world without oil, no oil for 18 wheelers, no oil for jets, no oil for construction equipment nor ambulances.

When that day comes (whenever it is) we may or may not have developed a renewable source of energy. The internet will be more important. Maybe doctor exams will all be done at home again --- online.

One thing is sure, we live in exciting times. The next 50 years will see changes that make the past changes seem small


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SouthAmerica: Reply to Birdman


I agree with you 100 percent we are in the beginning of a technological revolution around the world.

I believe that in 2050 the people will look to our time as if we were a cavemen and our technology will look to them as we look at the technology people had 100 years ago.

What will be discovered and the technologies that will be developed in the next half century it will be mind-boggling – mainly in the field of biotech and the new technologies that are not yet here - something similar to the internet which was not here only 11 years ago, and look at the www today – it is having a major impact in the way we live and do business.

But going back to your question. I remember reading an article about 7 or 8 years ago on “WorldWatch” magazine regarding the idea of India and China developing an economy to achieve a standard of living similar to the standard of living in the United States.

The article was long and very interesting. To put it into a nutshell that magazine estimated that for these countries to achieve the US standard of living would be necessary 5 planets the size of planet Earth with all the resources that we have on our planet today.

The article also mentioned something basic such as: if the Chinese decided to eat bovine meat, pork, and chickens in the same amounts that Americans were eating at that time, the impact that would have in agriculture in the price of corn, and soy and fuel.

As their standard of living goes up our standard of living will go down here in the US as the price of all resources starts going up all over the place because of increased world demand for all commodities.

I believe that it will be a mistake for the Chinese to develop cars based on our obsolete and wasteful technologies that we have today.

What we need in the United States today – But we don’t have it – We need a president such as President Kennedy who asked the nation when the Russians sent the Sputnik satellite into orbit – President Kennedy asked the American businessmen, and also the American people to support him in a project of developing all the technology necessary to make the United States the leader in space technology.

The American people gave him their support and the nation went to work to achieve that goal. The rest is history.

Today, we have a president, a vice president, and other members from his cabinet all people with personal interests related to the oil industry. No way in hell the larger American oil companies will allow the development of cars that make 300 miles to a gallon of gas here in the United States. Today, if it was possible to let American ingenuity do their magic the innovators might invent cars that don’t use gasoline all together.

Instead we have a situation in which the current administration prefers to go to war (such as in Iraq and probably soon also in Saudi Arabia) because of petroleum than allow the American scientists develop the automobile technologies of the future.

The automobile industry is in their dying mode in the United States, and they are dying a slow death. The Chinese can take advantage of what is happening and can help put the American auto industry out of their misery in the coming years.

The Chinese have to look from the following point of view. They have a very young auto industry and they have more than 100 auto companies today in China. A situation similar to the beginnings of the auto industry in the US 100 years ago, before the winners were able to survive the competition because of their creativity and innovation.

The Chinese don’t have the amount of petroleum necessary to fuel a rapidly growing auto industry in China. (The Chinese has 5 times the amount of people who will be potential drivers in China than the US has today.)

The Chinese must have a master plan regarding the location of the large cities that will grow very rapidly in China in the coming years. (We are talking about cities with 20 to 30 million people each, and that requires a lot of planning.)

The Chinese need to concentrate in developing a state-of-the-art transportation system for most of these people, since they will not be able to build superhighways to accommodate all the drivers in China in the coming years.

But in time they still can have over 300 million people driving cars in China as a complement to their 21st century transportation system.

Since the Chinese don’t have a massive source of petroleum available to them, the Chinese auto industry (the 100 auto companies) should be concentrating in developing technologies and cars that don’t pollute the environment and cars that can go 300 or 500 miles to a gallon of gas. Maybe the Chinese can develop the technologies necessary for a car that doesn’t need gas at all.

I am sure that will happen very fast in China and that will be the difference - which car company will survive in China in the coming years. The Chinese will be able to develop a state-of-the-art car for the new century based on innovation and new technologies, and also at a very low price – when they start selling these new cars in the US market they will be able to put GM and Ford out of their misery very quickly.

The Chinese will be able to supply the cars not only for their domestic market, but also most Americans will be driving cars made in China. The models of cars that we will see in the roads in the United States will be the Ming, the Han, the Nanjing, the Shanghai, the Mandarin, the Beijing, the Manchu and maybe the Tibetan.

In the other hand in the coming years any car made by GM or Ford will be considered a collectors item in the United States after these companies go out of business.

I am sure that this will be the strategy that the Chinese will develop regarding their auto industry. The beauty of what happens in China is that it happens in very few years, and the American car companies will not even know what is going on, before they are all out of business.

The Chinese are here to conquer and they will conquer with price, high-tech innovation, and by teaching a lesson to Americans on how ruthless capitalism really works.

Note: When I am saying the Chinese I am also including the Chinese from Taiwan, Hong Kong, and the Chinese network from around the world.

Ricardo C. Amaral

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