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Home Publications Blogs Beat the Press Higher Chinese Prices: How We Lower the Trade Deficit

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.

Comments (2)Add Comment
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written by izzatzo, June 17, 2010 11:10
WalMart employees rejoice! When Chinese workers get a raise, they do to. WalMart was right, who needs unions.

WalMart will just pay more for its products to cover higher Chinese wages and correct the trade balance, give its own employees a raise, then pass through the entire increase to its customers in the highly competitive retail markets where it operates.

Stupid liberals.
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written by El Gringo Colombiano, June 17, 2010 5:44
honest question: is it possible that Chinese businessmen (or biz/government officials working together) will start their own offshore outsourcing, to some of the random countries China has been investing in for resources, such as in Africa? Eg the next chapter of Race To The Bottom?

Or perhaps the population of all these poor countries China invests in is still less than China's 1.4 Billion, so that strategy would not work?

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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