While Chinese goods are going down well with U.S. consumers,
the trade benefits remain a bone of contention

By MATT YOUNG

 
BARGAIN PRICES: Vanessa Caceres examines a price tag at a Wal-Mart in Woodbridge, Virginia 

When Vanessa Caceres spoke to her husband about having to cut costs because of their newborn baby, it’s understandable. When she mentions her husband’s 12-year-old son and 20-year-old daughter still living with them in a modest townhouse in the Washington, DC suburbs, her financial situation becomes clearer, as does her appreciation of low-price-retailer Wal-Mart Stores Inc., and the country that supplies the bulk of its imported stock--China.

“Go China!” said 32-year-old Caceres, a part-time teacher and freelance writer.

What Caceres realizes, along with an increasing number of Americans, is that the world’s largest retailer that so many depend on for low prices does an extraordinary amount of trade with China, which helps keep those prices down.

In 2004, Wal-Mart directly purchased $9 billion in goods from China, said Beth Keck, Wart-Mart’s Director of International Corporate Affairs. It purchased another $9 billion indirectly from intermediate merchants, she said. In fact, for U.S. stores, it’s the most important source of goods outside the United States, Keck added.

The end result of ordering massive supplies of cheap goods--and many from China--is illustrated by consulting services group Global Insight, which found that Wal-Mart saved consumers on average $2,329 per household in 2004.

“It’s not my favorite place to be, especially in the evening,” said Caceres, noting a surplus of “scary” people that frequent the Wal-Mart where she shops because prices court all walks of life. “But that’s why they still draw me there: The prices can’t be beat.”

But like many Americans, while Caceres gets excited over lower prices--and outwardly supports China because of them--her deeper feelings toward China trade are mired in uncertainty. She is ambivalent, for instance, toward a U.S. Senate bill that could smack Chinese imports with a 27.5 percent tax.

Ticking time bomb?

 
GLOBAL COMMERCE: It’s easy to see where the majority of imported goods are from at Wal-Mart

The bill, supported by Democrat Senator Chuck Schumer and Republican Senator Lindsey Graham, threatens to impose the tax unless China negotiates a revaluation of the yuan against the U.S. dollar. They argue that the Chinese yuan is artificially low compared to the dollar, which they say makes it difficult for American workers to be competitive with Chinese producing similar products. The senators have delayed bringing up the bill for a vote until September 29, hoping that the Chinese would move on their own in the coming months in making progress toward yuan revaluation. But the delayed bill is a ticking-time-bomb of sorts, pressing China to do something about its currency lest a trade war erupt.

Despite her savings at the virtually “Made-in-China” Wal-Mart, Caceres isn’t sure how she feels about the legislation. She wasn’t initially familiar with it, even though if passed, it would force prices up for retailers like Wal-Mart that import from China, and almost certainly pass those higher prices onto Caceres and her fellow consumers.

But after being briefed on its contents, Caceres still hesitated at condemning the bill because she said she sympathizes with her fellow American workers, and understands the senators’ point about how they could be harmed if Chinese currency is weak against the dollar.

Across the country in Michigan, a reader of the Gaylord Herald Times wrote a letter to the editor expressing similar solidarity with her American countrymen, although with a much harsher stance toward China.

“I do not work at Georgia-Pacific, but when I learned about [layoffs there] from an ex-employee who hysterically cried, ‘What am I going to do about my family?’ it was all I could do to hold back the tears,” wrote Linda Greenway. “We will have many more years or decades of products from China and plant closings in our own neighborhoods.”

Greenway then urged fellow readers to buy products “Made in the U.S.A.”

But some trade experts suggest Caceres’ ambivalence toward China trade without hefty taxes and Greenway’s opposition to Chinese products are the wrong attitudes.

Double-edged blade

Dan Griswold, Director for the Center of Trade Policy Studies at a Washington-based libertarian think tank, the Cato Institute, cited a list of goods imported from China in 2005 that benefit American consumers: $51.9 billion in household goods, $40.9 billion in clothing and footwear, and $39.7 billion in sporting goods, toys, radios and TVs. He stopped much later when he accounted for the full $243.5 billion in imported goods.

“That is a good summary of who would be hurt by the 27.5 percent tariff that Senators Schumer and Graham are waving over the heads of the Chinese,” said Griswold, referring to virtually every American consumer. “It’s a really big club that would bang the head of Americans as hard as it would the Chinese.”

He also said that while 150,000 jobs are lost to China each year from the United States, about 16 to 17 million are created.

“That’s a small price to pay for a higher standard of living for tens of millions of American families,” Griswold said.

Furthermore, he said, if imports didn’t come from China, they would come from other developing nations where costs are also low, rather than being made in the United States.

Griswold acknowledged that the bill, even if eventually voted on and passed in the Senate, is unlikely to become law because of technical roadblocks that could more easily occur in the U.S. House of Representatives.

“But I think there is a real possibility it would pass the Senate, and that would send a terrible signal to the rest of world that there is a real danger of rising protectionism here in the United States,” Griswold said. A spokesman for Senator Graham, however, noted that the legislator’s goal was not to pass the bill, but to get China to move on currency revaluation.

For her part, Caceres also said she isn’t convinced by either bill proponents or adversaries in part because she’s fairly apolitical on trade issues.

Part of the reason might be because she believes her family would be insulated from financial damage so long as a price increase passed onto her is no more than 10 percent.

“I think I would be OK with that,” Caceres said.

She also has a touch of American overconfidence in her corporate savior.

“If they were to put some tax on, I’m sure Wal-Mart would find some way around it,” she said.

Perhaps, if Wal-Mart urged its customers--like Caceres--to submit personal stories of how much they save by shopping at Wal-Mart (China) and send it to their representatives in Congress, in the process mentioning a certain legislation and why it should be dropped, it may have some effect.