Time – The Curious Capitalist
August 13, 2010
Posted by Michael Schuman
Looks like we’re headed for another, repetitive round of U.S.-China bickering over Chinese exports. The U.S. trade deficit with China in June rose to $26 billion, the widest gap in nearly two years. Meanwhile, the reform of China’s currency regime, announced by Beijing in June, has proven to be not much of a reform at all, since the value of the yuan against the greenback has barely budged since then. Lawmakers in Washington are sure to renew their calls for punitive action against China.
But Washington is focused on the wrong issues in regard to U.S. trade with China, and for that matter, the rest of Asia. American policymakers should be much more worried about getting left out of the Asian trade story, and the potentially dangerous consequences that would have for the future of the U.S. economy.
What do I mean? Asia is becoming much more economically integrated and intra-Asia trade is growing rapidly. Part of this is just a natural process – as the region gets wealthier, its firms are finding more and more customers at home. But the integration is also part of an active policy on the part of Asia’s leadership. The continent is being bound together by a strong spirit of free trade.
You can see that by the explosion of FTAs inked by Asian countries. According to Ganeshan Wignaraja, an economist at the Asian Development Bank in Manila, who studiously follows issues regarding economic integration in the region, the number of free-trade agreements (FTAs) signed by Asian countries has grown from just three in 2000 to 60 as of July. Nineteen of those FTAs are among just 16 Asian economies. That means Asian countries are increasingly opening markets and dropping tariffs for goods made within the region, and for those countries outside of Asia smart enough to get in on the action. more …
