Twice a year (next on May 22nd) the economic leadership of China and America meets for a Strategic Economic Dialogue to disuse trade relations.

The dialogue was coined by Hank Paulson, America's treasury secretary and ex CEO of Goldman Sachs. He will welcome Wu Yi, the woman behind China's economic policy since 1991 and current vice-premier of China.

Unfortunately discussions are overshadowed by increasing hostility against China. The American congress accuses China among other things of stealing their economic leadership, natural resources and jobs. (This weeks issue of The Economist runs a survey about America's fear of China.)

First, China's population is more than four times bigger than America's population. Obviously China should command a bigger economy at some point (as it did in the past).

Second, natural resources are bought and sold internationally. As the world economy grows and more people live a decent life, so does demand for resources and their price. America could easily improve a thing or two in its efficiency of using resources. A higher price (and regard for the environment) provides the right incentives. The same counts for China.

Lastly: jobs. Is China stealing American jobs? Some members of congress seem to believe that world trade (or trade in general) is a zero-sum game. One job more in China's export industry means one job less in America.

That's not the case. As America imports from China, China imports from America. Jobs lost in one sector, will be gained in another. If America imports more than it exports (as it currently does), it pays with dollars. A promise of value which China can use for imports in the future. If China does not redeems those dollars, America basically imports for free. Hardly something to complain about.

In today's China Daily I read a smart statement by Ms. Wu: "The United States, as a global leader in science and technology, should give full play to its comparative advantage, enhance mutual trust and relax export controls to boost the competitiveness of American companies, revers the trend of dwindling market share of American hi-tech products in China, and reduce its trade deficit with China."

With comparative advantage, David Ricardo's theory on trade, Ms. Wu reminds us that even if America is far ahead in science and technology, it could still gain from trade in those fields.

As a previous investment banker, Mr. Paulson knows just as well about the gains from trade. That's why he should resist pressure from congress and further open the US economy. Ms. Wu would certainly welcome him.

Labels: Asia, Economics

10RMB = 1Euro

Labels: Asia, eat+drink, Economics