2011 report to congress - U.S.-China Economic and Security Review ...

37Stonewalling the WTO: A Case Study in China’sIntransigence—ContinuedIn sum, if the Central Propaganda Department were requiredto liaise with private parties, as the U.S. proposal called for, thegenie would be let out of the bottle, and the subversion of thecensorship regime would only be a matter of time. 77 For this reason,the WTO’s decision in the Publications case, and China’sfailure to honor the decision, is critically important. It suggeststhat in cases of conflict between internal political preferencesand international trade commitments, China will choose theformer over the latter.dkrause on DSKHT7XVN1PROD with $$_JOBImplications for the United StatesThe U.S. trade deficit with China has ballooned to account formore than half of the total U.S. trade deficit with the world andcreates a drag on future growth of the U.S. economy. This problemhas many causes, among which are barriers to U.S. exports andcontinued undervaluation of the RMB. The result is lost U.S.jobs. 78 While the exact number of U.S. jobs lost to China trade ishotly disputed—economist C. Fred Bergsten has estimated 600,000jobs on the low end, while the Economic Policy Institute has estimated2.4 million jobs on the high end—many parties agree thatthe costs are staggering. 79Although the RMB has appreciated by roughly 6 percent over thecourse of the last year, there is widespread agreement amongeconomists that it remains deeply undervalued. As a result, U.S.exports to China remain subject to a de facto tariff, Chinese exportsto the United States remain artificially discounted, and Chinesehousehold consumption remains suppressed. This contributesto a persistent pattern of massive and dangerous trade distortions,unnatural pools of capital, and dangerous inflationary pressuresthat threaten the stability of the global economy.Gone are the days when Beijing was content to be the low-endfactory of the world. The central planners behind China’s economyare intent on moving up the value chain into the realm of advancedtechnology products, high-end research and development, and nextgenerationproduction. This ambition will come at the expense ofAmerica’s high-technology industries.Similarly, it no longer seems inconceivable that the RMB couldmount a challenge to the dollar, perhaps within the next five to tenyears. Chinese financial authorities are laying the groundwork forthese ambitions via a series of bilateral arrangements with foreigncompanies and financial centers. While dollar-denominated financialmarkets retain a substantial advantage over their RMB-denominatedcounterparts in terms of new issuances, the RMB marketshave made remarkable progress in less than one year toachieve 11 percent of the daily trading volume of dollar-denominatedmarkets. Still, of the $4 trillion that is traded each day ininternational currency markets, trade in RMB accounts for only 0.3percent. The dollar is one side of 85 percent of all currencytrades. 80VerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00049 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464