In the following, I stray into sensitive territory I know for some of my readers. While I expect a little keep-it-on-the-markets-Marty feedback from an unsympathetic soul or two, I must — in my own defense — express my own humble view (one shared by economists not captured by political interests) that a true free trade policy (unilateral even) would be the most market (not to mention consumer at all rungs [especially the lower] of the economic ladder) friendly endeavor Washington could pursue.

If you read this with an open mind you may find yourself embarrassed by its simplicity. But, please, don’t be too hard on yourself. Most of us simply don’t have the time to scratch beneath the surface of economics and we, therefore, take verbatim the stuff couched in ways that make sense at the first, and, alas, only, blush. Truly, the couchers are adept at identifying and exploiting our grandest misconceptions.

A Letter From China (or insert any other emerging nation/trading partner) Inc.

Dear U.S.A.,

Our structure here in China, along with our huge population, allows us to produce many goods cheaper than your structure and numbers allow. Thus, we can be of huge benefit to your citizens. We have a proposition for you:

In 2017 we’re willing to produce roughly $475 billion worth of goods and deliver them to your people. In return, we merely ask that your people supply our people with roughly $120 billion worth of the goods they desire that your people producer most efficiently.

In that we’re of course not interested in engaging in such a lopsided arrangement to your benefit, we ask that you supply the remaining $350 billion in U.S. currency.

Being that we’ll balance our trade with U.S. currency, we’ll be investing in U.S. assets. Which will bestow additional benefits onto your consumers, as follows:

1. Your budget deficit needs financing, and given that your people prefer to purchase consumer goods with their discretionary income, and we’re looking for good safe investments, we’ll be buying a fair amount of the treasury debt you issue to fund your operations (an investment your consumers en masse are highly unlikely to consider). And in the process we’ll be holding down your cost of that debt (versus if we weren’t in your market) and, therefore, keeping mortgage rates, etc., reasonable for your people.

2. You are home to the world’s deepest financial markets. So we’ll be investing in your listed stocks and lending to your corporations through your bond market — which will benefit your millions of consumers who save in their companies’ 401(k) plans, etc., and who work for the companies we’ll be helping finance. Which of course will supply your economy with liquid capital that can be put to good use.

3. Where we see opportunities to deal with private U.S. businesses, like, say, hog farms in Virginia, we’ll avail ourselves of those as well. In such instances we’ll, again, be supplying your market with liquid capital (the dollars we pay for, or invest in, those businesses) and keeping U.S. workers fully employed in those enterprises (in many cases we’ll be looking to expand).

And 4. The dollars your consumers save by buying the goods we produce will be spent in their own communities. Thus, your small local businesses, that employ some 2/3rds of your people, will (along with their customers) benefit tremendously by our trade relations.

We’re sure you’ll agree, this is a major win for both of our countries. The U.S. and China are in different stages of development. Your consumers’ desire for goods at the most affordable prices provides our people with the means to lift themselves out of poverty. Our ability to supply your consumers at such favorable terms allows America to remain the world leader in virtually all manner of advanced services and innovation.

The beauty of our proposition is that it needs no formality. Our desire for the stuff your currency will buy ensures that we’ll produce many of the goods your people desire at the lowest possible cost. As long as America’s citizens are allowed to shop the world stage unfettered, we’ll be making massive contributions to their economy and, thus, their lifestyles, as described above.

Sincerely,
China Inc.