Yellen's 'wall' built on quicksand

As the Group of Seven (G7) finance ministers and central bank governors convened in Italy from Thursday to Saturday, U.S. Treasury Secretary Janet Yellen urged those countries to form a “wall of opposition” against China’s industrial policies.

This call has sparked a flurry of discussions on social media platforms like Reddit. One highly upvoted comment captured the irony: “Just hilarious. The developed world got addicted to China’s industrial capacity 30 years ago and now they are complaining because China is doing it too well.”

Another Reddit user criticized the hypocrisy, saying, “You can’t have your cake and eat it too. That’s hypocritical liberalism for us.”

In his 2004 book “Why Globalization Works,” Martin Wolf, a respected economist and columnist for the Financial Times, argued that the world’s challenge lies not in excessive globalization but in its scarcity.

Wolf’s insights are especially relevant today as globalization faces new impediments constructed by certain Western politicians, who are sacrificing economic principles for political expediency.

One case in point is the comparative advantage theory, which has stood for over two centuries. This principle suggests that if a country can produce a good more efficiently, other nations should import that product rather than erect tariff barriers. They should focus on exporting goods where they hold a comparative advantage.

Ironically, the United States, a global leader in exports spanning various industries like aircraft, refined petroleum products, electronics, pharmaceuticals, and more, appears to selectively apply this logic, branding its own subsidies as investments while viewing those of other countries as unfair competition. This double standard extends to exports, portraying U.S. exports as free trade and others’ as overcapacity.

For some U.S. policymakers, overcapacity seems problematic only when it affects others, particularly in sectors where domestic industries lack competitiveness. This mindset drove the Biden administration to impose substantial tariffs on Chinese electric vehicles, lithium batteries, solar panels, and other goods.

This approach reflects a common political fallacy driven by concerns over economic development, electoral pressures, and an urgency for quick fixes. It overlooks external factors like global economic downturns and dwindling market demand, attributing challenges to flaws in China’s economic model rather than systemic issues.

Critics, including figures like Yellen, level untenable accusations. Yellen’s skepticism towards made-in-China products appears disconnected from actual consumer preferences, as highlighted in a recent report on InsideEvs showing a significant openness among younger Americans towards Chinese EVs.

AutoPacific’s research revealed that a substantial percentage of respondents, especially from younger demographics, would consider purchasing a Chinese-branded EV. This trend underscores that quality and affordability often trump origin in consumer choices.

Rhetoric portraying China as a threat and advocating for decoupling overlooks the complexities of global challenges and offers little in terms of tangible solutions or societal welfare enhancements.

Yellen did express concerns about rising living costs, acknowledging substantial wage increases alongside noticeable price escalations. However, erecting a so-called “wall of opposition” against Chinese products will not alleviate high living expenses.

As highlighted in a recent New York Times article, Biden’s tariff decisions signal a departure from an era marked by extensive trade with China and the benefits of affordable goods. Whether the American public, grappling with the sharpest inflation spike in decades, will accept the consequences of this transition remains uncertain. (Xinhua)