Myanmar-China

US, China in Economic Slugfest

The headline in the New York Times to a despatch from Seoul that read "Obama ends G-20 summit with criticism of China" sums up, yes, what else – the American establishment’s perception of the outcome of yet another G-20 meeting held at a time when China holds the key to addressing the continuing imbalances in the global economy. That these imbalances are a creation of consumerist policies encouraged by the US Federal without keeping close tabs on the in and outflows is clear by now to any perceptible observer.

Had there been a strict monitoring, for instance, like India does by following what some American economists derisively term as muddled middle path, because Delhi still doggedly refuses to open up for full convertibility, Washington could have been in a position to be forewarned of the bubble building up with assets and loan portfolio mismatch in the real estate sector and also of the developing malignancy in the banking cancer.

President Obama wants the world to ignore his own backyard and focus attention on the Chinese, who, according to him, must ‘act in a responsible fashion precisely because of China’s success’.  And he did not stop there.

As NYT correspondent, Sewell Chan reported, President Obama gave up the ‘longtime practice of speaking with diplomatic caution about China’s currency policy’ and went on to accuse Beijing of intervening aggressively to keep its currency, the renminbi, below its market value to promote exports. He said it was a mistake for nations to think that “their path to prosperity is paved simply with exports to the United States.”   

That China is keeping its renminbi undervalued is undeniably true. Also true is the fact that China’s focus is on trade and trade terms that it believes best in its interest and in the interest of the world as it perceived it. This is one form of protectionism.

The US is also guilty of practicing protectionism with abandon taking in its stride the moaning of its trade partners from the Third World. So much so, for President Obama to accuse China of  a practice his own country is guilty of in the first instance is not in sync with the trading environment the world has come to live with for a long while.

Tough tacking and tough posturing offer good copy to his domestic media in a Congressional election year. But that is not good economics and not even good international trade practice.  

The world has moved from the Cold War era’s bi-polar days to the Uni-Polar phase and now reached multi-polarism, where neither the strength of the greenback nor of the reach of a DongFeng 21 Medium-Range Ballistic Missile matter.

As the G-20 communiqué reflected in the end, the world needs consensus based economic patterns. It is time for both the US and China to return to the strategy sessions since the United States’ practice of consuming too much and the Chinese tendency to spend less but export more are not sustainable for long..

  

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