Romney spoiling for bad trade war

Monday October 29, 2012

If Mr. Romney becomes the next president, can he take a tough stand against China? Possibly not. Why? Because China is one of America’s largest trade partners and the world’s second largest economy. Hundreds of America’s Fortune 500 companies are greatly profiting from manufacturing and investing in China.

General Motors, for in stance, has recently sold more cars in China than in the U.S., which contributed to GM’s recent turnaround to become a profitable company again. China is also a big market for General Electric which sells medical equipment like MRI machines and other high tech products in China. High-tech Apple makes all of its IPads, Macs and iPhones in China.

China is attractive to these companies because China’s labor cost is extraordinarily cheap, which allows American companies to enjoy a cost advantage and makes it possible for them to be more competitive in the world market. China’s largest manufacturer pays its assembly workers $20 a day -- $2.50 an hour -- while the hourly wage a manufacturing worker makes in the U.S. is $15-18 an hour.

Boeing is another company profiting greatly from its ties with China. For one thing, Boeing can get its aircraft parts from China at bargain prices. For another, it sells a huge number of commercial aircraft to China. Boeing has sealed a deal with China to secure 200 commercial planes order from China amounting to $20 billion. What’s more, its future estimated sales to China over the next two decades could be as many as 4,000 new commercial planes. Other American companies profiting greatly from China are Ford Motor, Nike, the Gap, Wall-mart, Coca-Cola, Pepsi, KFC, and Pizza-hut.

Considering this close trade ties between China and American companies, it is not rational to think that Mr. Romney, if he becomes our next President, will want to hurt financial interests of America’s big businesses, which are his closest allies, by being tougher on China.

All told, China and America need each other. It will be in the best interest for world’s two largest economies to settle trade disputes through negotiations, and not a trade war.



The writer is a professor of business and economics at Berkshire Community College.


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