[size=14pt]If the US declares economic war on China, we should all tremble[/size]
China and Germany exploit the global system without accepting reciprocal responsibilities to manage it. It cannot go on

In the darkest hours of the financial crisis in the autumn of 2008, it was obvious that all nations' economic destinies were intertwined. Today, that sense of a collective global economic interest is receding. On 15 April, a decision in Washington will be taken, the impact of which will be a sharp reminder than in 2010 all still connects. The United States is to rule, unilaterally, whether China is unfairly manipulating its currency against the dollar to promote its exports; if the case is accepted, it's a de facto declaration of economic war and a signal that now it is every country for itself.

The Americans aren't just making a noise. They will back their judgment with a tariff on Chinese imports into the US and China is unlikely to back down. It will fight fire with fire. Other countries, worried that the Americans and Chinese will dump goods on them that were destined for the Chinese and American markets, will feel it is legitimate to protect themselves in turn. Britain's export markets, open for two generations, will regress towards the closure of the 1930. Hopes of economic recovery will be dashed.

It is not just the US and China that are more economically nationalist. The Europeans finally arrived at a deal to help a Greece stricken with a colossal budget deficit last week, but it was hardly an exercise in European solidarity. Germany dragged its feet and only signed up if the IMF led the negotiations and stumped up a third of any bailout funds; there was no hint that Germany itself might increase public borrowing to reflate its economy to help other eurozone countries in trouble. It was Germany first.

The lack of internationalism is hopelessly short-sighted. All the evidence about the aftermaths of credit crunches where there are high levels of private indebtedness is that bank lending grows at a quarter or less of the rate it grew at beforehand, a hugely depressive effect on the economy. But this is a synchronised credit crunch with a synchronised global slowdown in credit; the depressive effect will be global. The temptation for any single country to use trade and currency policy to capture more of the stagnant pool of jobs is ever-present – it is what the Chinese have been doing for years – but when national economies were booming the impact could be shrugged off. Not today.

In Washington, patience is at an end at China's readiness to export unemployment to the US where the rate is already over 10%. There was open dismay at Prime Minister Wen Jiabao's recent claim to China's National Peoples Congress that countries such as the US, which want China to lift its currency and depreciate their own are protectionist. Chinese foreign currency reserves are climbing by $40bn a month. Already, total reserves top $2.4 trillion. Reserves can only grow so much faster than China's current account surpluses because China is printing more of its own currency to supply to world markets to keep its exchange rate down. Put another way, China is rigging its currency to a degree not paralleled in modern times.

The issue unites Democrats and Republicans. In the New York Times recently, Paul Krugman urged that on 15 April Obama act by slapping on a temporary tariff, as Nixon did on European imports in 1971. The notion that the Chinese have the Americans over a barrel because they finance America's deficits is wrong, argued Krugman. China needs the US to keep its markets open.

Krugman is right that China needs to change its policy. But the risk is that unilaterally slapping on tariffs could be self-defeating, causing the world to retreat into protection, competitive devaluation and prolonged recession. A far cleverer strategy would be to try for a global deal, as urged by Michael Pettis, of Carnegie's China Programme. China needs to be given time to reduce its dependence on exports and build its domestic spending, running at risibly low levels. This means boosting workers' wages, probably allowing trade unions, establishing property rights as collateral for borrowing and permitting its currency to rise.

If China gives that commitment, argues Pettis, the US should reply by saying it will maintain high government borrowing to keep American demand buoyant even as private credit grows slowly. It will keep its markets open. The EU should be part of the bargain, too, with the German government in particular spending and borrowing to maintain demand, and Britain taking an even more gradualist approach to lowering its deficit than the one outlined by Alistair Darling in Wednesday's budget. The aim is to keep global public deficits up to compensate for reduced private credit growth while China adjusts its exchange rate. Thus the world might avert trade war.



I like Pettis's grand bargain, but the chances of it happening are close to zero. First, Obama has to take the risk of trying – and of being snubbed by both China and Germany. Reforms such as extending property rights or encouraging worker power directly threaten one-party rule in China, which is why they are resisted. Thus China chose to reflate through investment rather than reform in 2009, increasing its reliance on exports. It is mercantilist, in that it wants to trade one way, because it is an authoritarian state. The party could thus never agree to its side of any bargain. Neither, after last week's dealings over Greece, would Germany's chancellor Angela Merkel. She hasn't got the imagination to be part of a global bargain to lift the threat of trade war. Obama might be tempted to try, but the political risks of rebuff are too high. Equally, he can't allow China to carry on stealing US jobs. I suspect he will tell China it has six months to change its policy – or else.

For years, we have assumed that trade and globalisation are an inevitable part of the landscape. They are not. China and Germany exploit the global system without accepting reciprocal responsibilities to manage it. It cannot go on. The deficit countries, notably the US but also ourselves to a degree, can no longer play the role we used to as importers of last resort. Britain has to build its productive and innovative capacity as does the US. Economic rebalancing has to be both domestic and international – with give and take on both sides.

The trouble is that neither Germany nor China sees their role in this way. The emerging consensus in America is that only strong-arm tactics will persuade them to change, thus the case for tariffs to leverage the international economic rebalancing that is otherwise being avoided. Britain is particularly exposed. In the 1930s, we could shelter behind a British-devised tariff cast round the empire. Today, we are not even in the euro. Darling's budget, and the debate about what he should cut and how fast he should do it, presumes the world in the years ahead will get back to and stay "normal". That seems ever more improbable. In which case – what is Plan B?

http://www.guardian.co.uk/commentisfree/2010/mar/28/will-hutton-china-germany

Ehh, so if this happens, which I doubt it will and if it does then it shows how idiotic our leaders and china's have become, then where does it leave Nigeria? No China to purchase oil, no U.S. to purchase oil, can't count of Europe, SA still painfully recovering, and Egypt, do they even trade much w/ you guys? Maybe India? Start learning some Hindi 

The U.S. and China both need to realize slapping tariffs on imports and keeping your currency devalued by as much as 40% is not the way to sustain long-term economic growth. President Obama wants to double imports by 2015, and lets just say Nigeria doubling her GDP is more likely to happen than us doubling imports to $2 trillion in 5 years, Businesses will just find a cheaper country to produce goods in. I'm thinking Vietnam & India, and maybe some African countries too (Nigeria?), so slapping a tariff on China won't bring back our manufacturing jobs, ahh the beauty of globalization

This should be in the foreign section.

China cannot afford to peg its currency to the US dollar for forever.

Ultimately tariffs will hurt both the US and China, and indeed India and Africa may emerge winners.

^
This directly affects Nigeria, thats why I put it here. There are very strong US and Chinese influences in various spheres of the Nigerian economy; so lets explore it as it might affect us. Where would such a battle leave a mono-product economy like ours?

@Poster

Could you please tell me why we should tremble.

Eddeux:

Ehh, so if this happens, which I doubt it will and if it does then it shows how idiotic our leaders and china's have become, then where does it leave Nigeria? No China to purchase oil, no U.S. to purchase oil, can't count of Europe

There is no way they can do away with oil. If they stop oil purchasing, it will definitely affect millions of its citizens. And maybe it will boost Nigeria Industrialization sector.

This was predicted by democrats early on!!!! What will happen according to my understanding is rich countries' market shares will drop while poor countries have get high a little but it might not last long. If they shut China and germany out, America also shuts themselves out. Though Germans and Chinese barely buy American stuffs, the world can't afford America/UK/France products. Productions costs in the US is too high. Unless they find a way to compete with Chinese prices, I'm sorry to say they world will continue to look at the cheaper side.

On the other side, the US introduced China to this way of dealing. Bell trade act in Philipines was meant to make sure American dollars is more than Philipines in value so Americans can invest in Philippines and get cheap Labour. Same in Japan. Americans exported tons of manufacturing jobs to Japan after the war forgetting it hurts their own economy in the long run. The American way of life will just have to adjust to this mess. I said on some other thread that I expected the Chinese currency to be twice the American dollars by now cause of the export activities in China. I never knew China is the one keeping it down themselves.

I am more interested in what these powers would do to get cheap energy in a time of strife when markets are stretched and resources are low, but there is a need for the powers to keep their domestic wheels turning. These are the sorts of things Sanusi and the CBN should be very concerned about.
If the US and China engage in economic warfare, it would surely be a matter of National security for us. How can we insulate ourselves? To me, the best way would be to form stronger alliances with either the US or China (definitely not both).

china is still far behind america.don't be fooled by the chinese.they can't take america on now.the chinese are becoming over-confident not knowing america can still wreck their economy.the chinese are still essentially poor.forget about the bloated chinese goverment and their foreign reserve.forget chinese inroad into africa,america still holds sway.and will do for years to come.

Beaf:

I am more interested in what these powers would do to get cheap energy in a time of strife when markets are stretched and resources are low, but there is a need for the powers to keep their domestic wheels turning. These are the sorts of things Sanusi and the CBN should be very concerned about.
If the US and China engage in economic warfare, it would surely be a matter of National security for us. How can we insulate ourselves? To me, the best way would be to form stronger alliances with either the US or China (definitely not both).

Alliance with US or China? To protect us from trade war? Look what is important is providing for the Nigerian population. We need to have less dependency on foreign policies and by that I mean making sure whatever is happening in the trade war has little to no effect on us. Nigeria's economy doesn't depend on Foreign market except in oil sector. Nigeria needs to strengthen domestic productions and make Africa our market just like South Africa is doing. If are looking to gain from this trade war, we will lose big time. We don't need alliance on this issue. Nigerians needs food, by now I don't expect us to be importing as much as we are. Every consumer goods in Nigeria should have a large percentage of it made in Nigeria. Nigeria is big enough market. When this manufacturing thing goes off, it creates job here in Nigeria and as we start exporting to other African nations out economy get more jobs into it but what should be most important is domestic trade. Nigeria is a multi trillion dollars economy if properly tapped. Alliance with US or China means nothing but exporting oil as of now and China won't want to import anyother thing from Nigeria so what do we get for the alliance? we get to export jobs to other economies be it US or China. Our domestic economy is Important the most!!!

Must you wait for your enemy to declare war against you before you realise you are at war?

America has been at war (economic) with China for many years.

Unfortunately on a financial scale they appear to be losing.

But the financial scale is based on the dollar - Which for those in the know is a worthless currency due to the amount that has been printed and is in circulation.

China has amassed a rediculous amount of dollars - which only has value whilst America say's it has value!

There is a fierce batlle now surrounding other countries mineral and energy resources which China is fighting covertly - including in Nigeria.

America has always been very brash and overt in their actions. China makes moves covertly and just like America doesn't care who they exploit.

The whole world knows what America is about - But what about China?

There is a saying - Better the devil you know.

And nobody really knows what China is about or what there true intentions are.

All we can do as a country and continent (Africa) is fight back against their exploitation and become at least as scrupolous as them in our dealings with these international rogue states.

Whether or not they declare economic war on each other Nigeria would be silly not to exploit the situation and play them off against each other until they either self destruct or show respect.

They are not our brothers - they know that but for some reason we fail to grasp this point.

9jaganja:

Alliance with US or China? To protect us from trade war? Look what is important is providing for the Nigerian population. We need to have less dependency on foreign policies and by that I mean making sure whatever is happening in the trade war has little to no effect on us. Nigeria's economy doesn't depend on Foreign market except in oil sector. Nigeria needs to strengthen domestic productions and make Africa our market just like South Africa is doing. If are looking to gain from this trade war, we will lose big time. We don't need alliance on this issue. Nigerians needs food, by now I don't expect us to be importing as much as we are. Every consumer goods in Nigeria should have a large percentage of it made in Nigeria. Nigeria is big enough market. When this manufacturing thing goes off, it creates job here in Nigeria and as we start exporting to other African nations out economy get more jobs into it but what should be most important is domestic trade. Nigeria is a multi trillion dollars economy if properly tapped. Alliance with US or China means nothing but exporting oil as of now and China won't want to import anyother thing from Nigeria so what do we get for the alliance? we get to export jobs to other economies be it US or China. Our domestic economy is Important the most!!!

Oil money is all we have, that is our whole economy. The ideas you've put forward might be good for the long term, but we are talking about events that might kick off full steam, April 15th; there isn't the luxury of developing our domestic market in less than 3 weeks. We would need a clever way to deal with the powers in the outside chance that sh** hits the fan.

Beaf:

Oil money is all we have, that is our whole economy. The ideas you've put forward might be good for the long term, but we are talking about events that might kick off full steam, April 15th; there isn't the luxury of developing our domestic market in less than 3 weeks. We would need a clever way to deal with the powers in the outside chance that sh** hits the fan.

HHAHAHAHhAHAHAHHAHA That was funny. Hahaahahaha. But I'll rather get from both sides and not try to be on one side. If the US wants oil they get what we can give and if cChina wants oil they get what we can give. Nigeria is only respected for our consumer habits in world market remember? When the dust settles we might make a new enemy if we take sides. Let's just do things normally as if no trade war. If China can't strengthen it's local consumers then it really has no chance of winning in this war.

This was definitely coming.

America is not going to stand by and watch its position as the world largest economy come/superpower being raked off by this behemoth called China. China is growing at an alarming rate. It is now the third largest economy in the world and would most likely overtake Japan this year. If America doesn't slowdown China, it a problem for U.S Jobs.

The US consumers hold the key to China's success. The only reason China is where it is today is the simple fact that Americans are a sucker for cheap goods. If U.S raises tariffs on Chinese goods, cheap products would then have to come from countries like India, Vietnam Brazil and the like.

As per its effect on Nigeria, I bet that would depend on where we choose to pitch out tents. I'd advice we go with the U.S anyday, it is more likely that the Americans will come out of this as victors.

America can no more declare economic war on China than it can declare war on itself.

China is outcompeting everyone else in the free market, a free market that Yankee championed when they were in a position of great leverage. . . now Yankee see the need for protectionism after preaching the superiority of free market policies for decades.

We live in a globalised plutonomy now and capital, like water,will follow the path of least resistance. . . a road that leads to the East. Labour, and everything else will continue to be outsourced, a harrowing prospect for Obama as he contemplates rising unemployment figures in the US

Ibime:

America can no more declare economic war on China than it can declare war on itself.

China is outcompeting everyone else in the free market, a free market that Yankee championed when they were in a position of great leverage. . . now Yankee see the need for protectionism after preaching the superiority of free market policies for decades.

We live in a globalised plutonomy now and capital, like water,will follow the path of least resistance. . . a road that leads to the East. Labour, and everything else will continue to be outsourced, a harrowing prospect for Obama as he contemplates rising unemployment figures in the US

China doesn't do free market. It's a fallacy to think so.

China is an export economy. Try setting up a business in China as a foreigner and see where that takes you. You'll be harassed constantly until you are driven out (See Google).



China is manipulative. Africa (esp. Nigeria) should be careful about how it deals with both the Chinese and the Westerners.

They both loathe us equally, Chinese culture detests blacks, and so do Chinese people. We already know what whites think of us. I know plenty of Chinese people, drink with them long enough and you'll notice that they think of blacks as half intelligent.

A Chinese friend of mine told me (when he was drunk) how American blacks are perfect because they are mixed with whites, they have "black strength" and "white smarts". Guess where that leaves Africans.

As far as I'm concerned Nigeria needs to help the AU buckle up against the possible Chinese incursions into Africa in the next 100 years. With world resources dwindling, leaders in developed countries from East to West will be under pressure to secure Africa's untapped resources one way or another. To many of them, Africans be damned.