Wednesday, April 13, 2011

Taxing Their Imports: Could It Bring China In Line?

Potential Presidential Candidate Donald J. Trump has suggested that a huge problem for the United States is that China has taken away jobs and manufacturing, while gaining an economic advantage over the United States through abusive practices such as currency manipulation. China is a nation that has engaged in oppressive conduct, including censorship, socialism, and restrictions on academic freedom. Before Trump, many have brought up concerns with China taking jobs away from America and sucking money out of the economy.

Trump's solution, which he voiced in an interview this week, is to slap a 25% tax on all Chinese imports if China were to not get in line. But would this work?

The answer, likely not. China would likely be able to maintain cheaper prices than American manufacturers even with a 25% price hike caused by an import tax. In China, a factory can operate without worrying about adhering to strict occupational safety standards, environmental regulations, or even paying a decent wage to employees. For the price of one minimum wage American worker, a dozen or more can be had in China. Further, the country's movement to embrace more free-market capitalism has led to new entrepreneurship and investment in China while the United States makes the mistake of moving backwards towards the socialist concepts that failed in the Soviet Union.  Further, the Chinese would likely figure out methods of tax evasion. A Chinese company might send products to a company in Canada, and then the Canadian company would take advantage of free trade agreements to bring the product to the United States.

What can the United States do? Part of the answer, but not the complete answer lies in spreading freedom and democracy, education and immigration reform, and the American consumer.

If the people of China were to stop working for such low wages and demand pay in line with what American or European workers get, Chinese companies would no longer have a labor cost advantage over American companies. The United States should make effort to help the people of China advance, thereby weakening their own country's economy.

Many young Chinese come to the United States to get an education -- and then they go back to China and help grow its economy. The United States should adopt a policy of giving students who graduate with at least a Bachelor's Degree the option of remaining in the United States and instead of working for a Chinese company, working for an American company and helping grow the American economy. Enable these students to work for a few years and then obtain citizenship and become supporters of American freedom and democracy for life. Additionally, the higher education industry in the United States needs to stop giving scholarships and admissions to Chinese students while turning away American students. By educating the Chinese, the United States loses competitive advantage.

Finally, the American consumer must stop buying from China. The reason the Chinese make money is because they put their products in American stores and Americans go out and buy them. Instead of buying Chinese-made products, American consumers should buy American-made products. If a Chinese company can't sell its product, they won't be able to hurt American business and kill jobs in America.

What is the complete answer to China? The Report knows the complete answer is very complex. It's a solution that will require much thought, the support of the American people, strong leadership, and an understanding of the large number of players, conditions, and variables. One thing that is NOT the solution to the China problem is to maintain the status quo. If the status quo is maintained, then the United States will find itself no longer the world's strongest economic power and the situation shown in this video could become reality.

We invite our readers to comment on what they think the solution is to the China problem by posting a comment on this post. Remember, The Report has comments enabled on all of its posts. We do not censor comments, unless they are blatantly spam, pornography, or attempts to "flame" others, in which case we may remove them.

1 comment:

  1. china blogger beat you america. our smarter people pass you intelligence.