Comments: Protectionism could block the 'China effect'

Agree David, the protectionists are short sighted. If our clothing, frilly chinese underwear and trainers go up in price then so does our CPI. Which in turn exerts upward pressure on rates, which exerts downward pressure on us.

Surely the protectionist crowd must know this, or do they? If they do then why do they pursue such a policy? Is it to satisfy their politcal stakeholders and further their own careers? Are the Spanish textile firms etc and supporting politcal clout going to compromise us all?

Posted by werewolves at September 17, 2006 11:56 AM

Interesting stuff, David. Radio 4 had an interesting, if one sided, programme about Chinese commerical espionage in the US. It was, in parts, a thinnly veiled attack on China's pilfering of US intellectual property for its own ends. Stuff like this will only add to the protectionist lobby's armoury.

The Economist has had some interesting thoughts on globalistaion over the last couple of weeks. A keen advocate of globalisation, they also noted that there are winners and losers in Western countries. For the top echelons things have been tickety boo, but for Joe average and below things haven't been so pretty. Their view is that without better mechanisms for sharing the benefits, the malcontents will grow in number and influence. All grist to the mill for protectionist politicians.

Posted by Tom at September 18, 2006 09:43 AM

FYI:

http://www.paulvaneeden.com/displayArticle.php?articleId=169

"A simple calculation will tell you that if China's exports are growing at 30%, and exports account for 30% of GDP, then the growth in exports alone will increase GDP by 9%. But hold on, that's how much China's entire economy is growing! So where is the internal demand? Where is the Chinese consumption that will propel base metal prices? Either the World Bank's data is completely useless, or else China's economy is far more dependent on exports that what some people think"

Posted by Dan at September 20, 2006 01:45 PM

The total US$ volume of Chinese exports to the US in 2003 was $92 billion while the US GDP for 2003 was $10,948.5 billion. With an impact of a staggering .8%, I think Chinese imports effects on the US rate of inflation are fairly insignificant. With an economy the size of the US, China is nothing more than a fringe player. I'm sure more recent data is available but I doubt it would mean anything different. Is it really any different in England?

Posted by Gary Bezowsky at September 25, 2006 06:38 AM

Fair point. In the case of the UK, Chinese imports are about 12 billion, in a 1,200 billion plus economy. The argument would be that the China effect goes beyond this, by imposing constraints on domestic price-setters as well as other countries

Posted by David Smith at September 25, 2006 11:59 AM

Certainly China does pose some competition for domestic and international producers but it is hard to believe that with such an insignificant share of the economy it's really in that many markets to have much influence. The march of technology is really in play for all aspects of the economy. Prices march downward across the economy absent debasing the currency or the distortions of big government interference.

I think China is only the latest candidate for the blame game. We have our own US idiots in the Senate bashing China and they represent both political parties (Schumer and Graham). We'd be better off watching the growth of the money supply, lowering marginal tax rates and reducing the role of government in the economy.

Posted by Gary Bezowsky at September 25, 2006 05:12 PM