China's Currency Too Strong? If Term Paper

China's currency policy may make that country the main country with whom the U.S. has a current account deficit, but if not for China the U.S. would have the same problems, just with another country for the protectionists to scapegoat.

3) I think an aggressive legislative posture is the best approach to take with regards to China's currency position. Ultimately, China is an economic actor the same as any other. They are going to do what they feel is best for their country (Wolf, 2006). Thus, in a situation like this where their currency policy is viewed to be doing harm to the U.S. economy, the best approach to make them reconsider such policy is to alter the economics of that policy. Thus, tariffs, sanctions and anti-dumping fines are the most effective means.

In the specific case of China, the notion that a WTO ruling is going to change their behavior is a bit optimistic, since countries with the size and clout of China or the U.S. seldom give serious attention to WTO rulings, but it would give the U.S. The moral high ground on which to enact trade quotas. However, if the U.S. is not going to seriously consider such sanctions or quotas - and given that increasing cost of consumer goods is the sort of issue the public considers when they go to the ballot box the U.S. may indeed lack any real motivation to pursue these - then this sort of posturing is going to accomplish little. I feel it best if the government took this posture and backed it up, but the former does nothing good without the genuine will to do the latter.

Bibliography

Martin Wolf, "How China has Managed to keep the Renminbi Pinned Down," Financial Times, October 11, 2006, p.13

Sue Kirchhoff, "First step: China Will Stop Pegging Yuan to Dollar," USA Today, July 22, 2005, pp. 1B, 2B

Keith Bradsher, " a Chinese Revaluation May Not Help U.S.," the New York Times, January 4, 2005, pp. C1, C5

Ronald McKinnon, "The International Dollar Standard and Sustainability of the U.S. Current Account Deficit," Stanford University, March 29/30, 2001, retrieved online June 11, 2008 at http://www-econ.stanford.edu/faculty/workp/swp01013.pdf

John McCary and Andrew Batson, "Punishing China: Will it Fly?" The wall street journal, June 23-24, 2007, p.A4.....