The New Yellow Peril

A heads-up for the coming election year, from my friend Jon Markman:

China is no job-stealing bully

Essentially, the administration is going to try to blame the high U.S. unemployment rate on the Chinese. They are going to claim Beijing is violating World Trade Organization and International Monetary Fund rules by “manipulating” the renminbi through complex currency transactions in a blatant attempt to keep it undervalued. A purposefully undervalued currency makes a country’s exports cheaper than they would otherwise be, providing an unfair trade advantage.

You won’t have to wait long to see how this plays out. On Capitol Hill Thursday, the Bush administration’s stance toward China will come into potentially explosive view in testimony that could affect everything from the prospect of financial stability in Asia to the value of tech stocks on Wall Street and the price of pajamas in Arkansas.

The venue will be Treasury Secretary John Snow’s required annual testimony to the Senate Banking Committee on trading partners’ currency practices. For years, this has been just another obscure date on the congressional calendar, but since the political wing of the White House decided that President Bush’s standing in industrial states would improve if he blamed the decline in U.S. jobs on China, the secretary’s appearance has taken on a new level of importance.

Of course, this is nothing more than scapegoating. (The sign on Bush's desk should read: "The Buck Stops Somewhere Over There.") The lingering unemployment rate is largely a product of the Bush administration's pathetic handling of economic policy, especially its emphasis on tax cuts (and concomitant structural debt) and its refusal to engage in any kind of serious job-creation stimulus.

This is the economic equivalent of emphasizing a missile-defense strategy and cutting back on counterterrorism, which was the Bush policy before Sept. 11. One wonders, likewise, when we're going to have what Paul Krugman calls our "Wile E. Coyote moment."

None of this surprises me terribly. (One of my favorite aphorisms: "A recession is the Republican way of shortening the lift lines at the ski hill.") Lord knows most of the Republicans I know were not exactly enamored of the (at times ridiculous) worker's market that existed before Bush's election, especially at the height of the Tech Bubble. Most conservative businessmen's preferred M.O. is the Wal-Mart way, which is largely what we've gotten since Bush's election.

Ironically, Wal-Mart is one of the companies that stands to lose a great deal if Bush pursues this course -- though it will be American consumers and Wal-Mart workers who have to bear the brunt of the costs.

In any case, Republicans have been making bogeymen out of China for the past several years, embodied in the phony Wen Ho Lee and campaign-finance scandals. Of course, Bush's lame performance in the showdown over the airmen captured by the Chinese in April 2001 did not exactly impress upon anyone his leadership skills. Even conservatives called Bush's behavior a clear sign of "weakness."

More to the point, as Markman suggests, this is a ploy that has serious ramifications for national security. China ostensibly is a major partner in America's "war on terror," particularly in keeping it under control in Asia. It also is one of our most significant bulwarks in dealing with North Korea:

In short, China is more bogeyman than bully in its trade relationship with the United States. An attempt to vilify it over the loss of manufacturing jobs is short-sighted, giving fuel to critics who believe that the Bush administration has progressed from a militarization of its foreign policy to a criminalization of its trade policy.

President Bush is walking a tightrope as he balances an economic policy bent on antagonizing China with a foreign policy that desperately needs China's help on North Korea. At the moment, it seems aggression is winning out over diplomacy.

And politics over national security.