Higher Chinese Prices: How We Lower the Trade Deficit

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Wednesday, 16 June 2010 20:41

USA Today reported that higher wages for Chinese workers could mean higher prices for U.S. imports for China. While the paper reported this as bad news, this is exactly the process through which the U.S. corrects its trade imbalance. There is no other way.

It is also worth noting that higher Chinese prices will work to the benefit of workers who have been placed in direct competition with Chinese workers. While trade negotiators from both parties have actively worked to place U.S. manufacturing workers in direct competition with low-paid workers in China, they have largely left in place barriers that protect doctors, lawyers and other highly-educated professionals from competition with their much lower-paid counterparts in China.

As a result of these one-sided protectionist policies, wages of non-college educated workers in the United States have fallen relative to more highly educated workers. The increase in wages for this segment of the Chinese labor force will improve the relative position of non-college educated workers in the United States. The benefits on the trade balance and for non-college educated workers should have been mentioned in the article.