Will an appreciation in the Chinese yuan ultimately benefit the United States?
Debate Rounds (3)
The Negation should prove that the negative impacts of the change in the Chinese exchange rate would outweigh possible benefits specifically towards the United States in the long term while providing examples of these quantifiable negative impacts.
Contention 1: American Relations
President Obama has stated that the future relations with China will "shape the 21st century ... on nearly every front that is happening." According to a professor at Cornell University, Eswar Prasaa states that an "immediate benefit of a modest currency adjustment is that it will cool off some of the overheated rhetoric in China and the United States, allowing nations to focus on important economic strategic uses rather than getting into petty trade disputes." China's currency offset will appease the United States enough to focus on coming to a consensus on major issues and ease political tension temporarily. China and the United States have continually debated about global warming, military balance in East Asia and human rights. A shift in the United States and China "tug-a-war" will strike sparks for reconciliation on major topics. If the United States sees that China has started complying with American demands, then the United States will also begin to comply with China on these major issues. For example, according to America.gov, the United States and China resolved "more contentious trade issues during the year before  thanks to more bilateral engagement." New York Times states China and the United States have both argued heavily on United States' policies for protectionism. If the Chinese yuan became more flexible, the United States would listen to more Chinese policies and create compromise.
Contention 2: Trade Deficit
When the dollar loses value, China buys dollars through United States Treasuries to support it. It exports cheap goods to the United States. In November of 2009, China owned 789 billion dollars in United States Treasuries. This makes China the largest owner. This inter ties the United States and China closely together extremely closely together. This allows China to have major political leverage over the United States fiscal policy according to the U.S Treasury. However, if China was to announce the yuan's appreciation, it would stop major inflammation in court. Fred Bergsten stated that "the Chinese currency has been undervalued by as much as 40 percent." This has resulted in mass criticism in China and has been pushing the United States to take legislative action in Congress states the Huffington Post. However, the Fair Trade Committee, who stated that "China's currency is manipulation", asserts that the United States could pay back 514 million dollars of their trade deficit faster and easier if the Chinese currency did not fluctuate and appreciated.
Therefore, I stand in affirmation in today's debate.
To clarify, the negative should be able to win this round by proving that there are more significant negative impacts towards the United States with the appreciation of the Chinese yuan.
Starting with Jennifer's first contention, we can already see that it does not make much sense nor follows the resolution. Her contention merely says that the increase of the yuan may stop smaller disputes and increase reconciliation on bigger issues, but this argument is illogical. Even her own contention states that this will "ease political tension temporarily", which shows that this may result in a 'short-term' benefit between China and the United States. Instead, as China's yuan becomes stronger, an increase of competition would occur between China and the United States causing bad relations. According to Yahoo Finance, the new House of Representatives Bill, which aims at pressuring Beijing to increase the yuan by branding it in violation of world trade rules would only destroy trade relations between China and the U.S. Destroying trade relations between the two countries will not help reconciliation on major topics between the two countries.  Also, the single example of the bilateral agreement that she provides is not specific and does not even necessarily refer to the appreciation of the Chinese yuan. A bilateral engagement is just the relationship between two countries.
Moving on to Jennifer's second contention, she states that an appreciated currency will help the U.S. pay back its trade deficit. According to Businessweek, the appreciation of the yuan will not affect or narrow the United States' trade deficit because it is so substantial. The yuan strengthened 0.7 percent since June 19 of this year and the United States' trade deficit increased to $22.3 billion in May, the biggest since October.  This clearly shows no correlation between the appreciation of the yuan and the decrease of the United State's trade deficit. Jennifer does not provide any evidence to show that the U.S. would even pay back their trade deficit, showing that this is not a benefit the United States would gain from the increase of the yuan.
Now we will move on to the negative's case.
To help define the phrase "an appreciation in the Chinese yuan" in the resolution, China Daily states that any increase more than 20% would cause China's employment and domestic consumption to fall by 3.03 percent each and its GDP will fall by 3.18 percent.  We can already see that even with an appreciation in the Chinese yuan, it will not be very substantial since a major increase (more than 20%) is devastating to the Chinese economy and that China will refuse to shoot itself in the foot.
Contention 1: U.S. consumers and businesses
The appreciation of the yuan actually threatens U.S. consumers and businesses. According to China Daily, even a 20 percent increase in the yuan's value will not help the U.S. economy. Using a computational general equilibrium model covering the major economies, a 20 percent rise in the yuan will only worsen American trade balance by $10.5 billion since the substitution effect between Chinese exports and U.S. made goods is very weak. This will only cause the Balassa-Samuelson effect, which roughly states that a country's currency will experience real revaluation when it catches up with advanced countries in terms of per capita income, resulting in the price increase of Chinese goods and assets for any U.S. consumers and businesses to buy.  Also according to Uwire, the yuan is currently undervalued by 20 to 25 percent compared to the U.S. dollar, meaning that Chinese goods are selling in the United States at extremely low prices while American goods are relatively more expensive in China.  U.S. consumers and businesses are rather better off with a low-priced renminbi because of the large availability of low-priced Chinese goods.
Contention 2: Imminent trade war
The appreciation of the Chinese yuan will cause an imminent trade war between China and the United States. As the price of Chinese goods increase in the United States and become less competitive, this might lead the Chinese to block American goods in retaliation, making them even more expensive and leading to a turnover in American jobs or force the U.S. to turn to other less dependable countries. According to the Washington Times, Beijing warned Washington on September 30 of this year that "economic ties might be damaged after American lawmakers escalated the conflict over China's currency controls, inching the two economic giants closer to a trade war". Pressures over trade are building up as the global recovery falters. Washington, Beijing and other governments have pledged to avoid protectionism that might hamper a revival of growth. Also, Jiang Yu, a foreign ministry spokeswoman, at a new briefing stated, "Exercising protectionism against China under the excuse of the renminbi exchange rate will only severely damage Chinese-U.S. trade and economic ties."  An increase of the Chinese yuan through bills will cause bad relations between two heavily interdependent countries and a bad economy in the United States.
Therefore, I urge a clear negative vote in today's debate.
First, let's go over my first contention.
My opponent has said that my previous statement was contradictory because I talk about "temporary" appeasement. However, what I was trying to emphasize was small compliances on either side results in major, long term benefits. Empirically, one can see that Chinese-American relations have drastically developed due to small compliances on each side. For example, after the China signed the United Nations Security Council Resolution 1373 for a major counter-terrorism measure after intense debate, security bases in Uzbekistan and Tajikistan established in fear of People's Republic of China leadership in the war on terrorism were evacuated.  This example proves the basis that the United States and China maintain economically and politically. Essentially, these two countries keep relations in equilibrium; satisfying one's demands if the other complies to the other's. In the same sense, China's currency offset will mitigate tensions in the United States to focus on coming to a consensus on major issues. Bilateral engagement, like my opponent said, is relations between the countries but beneficial and meaningful bilateral engagement is what resolved the contention trade issues I stated in the America.gov evidence. I apologize for that ambiguity.
Next, my opponent argues that pressuring Beijing will harm the United States and China's trade relations. This is absolutely absurd. China depends on United States trade and imports. The US has become China's biggest investor with an investment of 4,858 million dollars alone in 2001. The majority of citizens in China understand the United States' importance in their rapidly growing economy. It is impossible of China to continue at a 10% growth rate if their major income for their exports is reduced. If the United States begins to suffer, then China will as well. The Chinese Academy of Social Sciences found that the majority of China looked favorably on Americans do to their large spending power in China. The government of China is never going "shoot themselves in the foot" like my opponent says. This is the same with trade agreements between China and the United States.
Second, let's see why decreasing the deficit is extremely important.
An International Monetary Fund study found that a United States deficit would result in the loss of 400,000 to 500,000 manufacturing jobs despite an economic expansion . Recently, the United States is in a recession, resulting in a greater job loss. An Economical Policy International report found that the trade deficits eliminated 2.4 million jobs in the United States between 1979 and 1994 when the trade deficit was not even significant at all.  However, the International Business Times sealed the number of jobs lost to increasing trade deficit as 500,000 for 2010 and a loss of 5.5 million manufacturing jobs in the United States ever since China joined the World Trade Organization in 2001 . Due to this study, most economists now agree that the trade deficit is responsible for 20 to 25 percent of the increase in income inequality that has occurred over the United States over the past two decades . China's influence on trade and the trade deficit specifically has resulted in millions of jobs in the United States.
Trade leverage on the United States also prevents the United States in holding power in political affairs. On the political front, Chinese officials have begun expansive assertion of China's national sovereignty. Real Clear World states that "Beijing has long claimed that Tibet and Taiwan are "core national interests" and foreigners should keep out of these "international affairs". Now Chinese have begun to apply this diplomatic term to the South China Sea, a 1.2 million square mile area which flows at least a third of global maritime commerce and threatens naval transit interests of the US." It has deepened economic ties with Burma and Afghanistan while ramping up its close relationship with Pakistan by offering civilian nuclear assistance adds the Yale Center for the Study of Globalization. However despite all these clashes, the United States is powerless to do anything. According to the Telegraph, the "Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes sanctions." China has the power to counter pressure the United States with its 1.33 trillion dollar bonds of foreign reserves at any time. China simply has too much power through the trade deficit on international politics, not only undermining American power and influence but decisions and policies that will echo throughout foreign policy.
Appreciation of the currency stops the vicious cycle of foreign currency flow. Through China's huge trade surpluses, reaching nearly 40.1 billion in November of 2009, and interest money from the United States, China buys more bonds in international financial markets, especially those of the United States. Treasury data from Washington suggests the Chinese government might be allocating a higher proportion of its foreign currency reserves to the dollar. This creates a viscous circle of economic dependence and influence from China rather than an independent American economy.
My opponent tries to argue that the appreciation of the yuan can only be limited to 20%, however, the Chinese currency is undervalued by nearly 40 to 50%. The United States could start with a smaller appreciation but eventually the United States will force fair trade to be conducted. U.S Secretary Timothy F. Geither stated just today, October 12th, that China will let its currency rise "at a pretty significant rate and will allow it to appreciate more over a longer period of time." We continue to see that because China's yuan is so undervalued, the United States will coerce China to increase in value. In fact, the yuan has recently peaked at the highest rate that has ever been recorded.
Joanne uses a study from China Daily for her first contention but one can see that the same study also found out that the gradual revaluation of the yuan does not harm the Chinese economy greatly. For example, it states, if the yuan rises by 5 percent against the greenback, employment and consumption in China will only drop by .74 percent and .57 percent while the trade balance will improve a whopping 3.47 billion dollars. It also states that a moderate revaluation of the yuan will be bring profits to China like lower inflationary pressure. Ultimately, taking all the factors into account, the study concludes by saying that overall due to the Balassa-Samuelson effect, China would do better to choose the yuan's revaluation over inflation. So in fact, I thank Joanne for coming up with this piece of evidence because this exactly proves out point.
My opponent's second contention states that there would be a trade war but please refer to the second paragraph. This addresses not only Joanne's previous response but also refutes this contention. China would never allow itself to allow its economy to drive into a recession. When the United States is imperative to its success as a stable nation, China is not going to stop trade with the United States. The United States would also prevent this from happening. The United States has continually started move towards a white collared economy where the majority of people now receive higher wages along with a higher standard of living. This is all because China is able to manufacture goods cheaper so the United States can focus on technological sectors. Later, these ideas and patents go back to China in order to make more goods.
Due to the limited number of characters, Joanne may email me for any links and sites used in my refutation.
Let's first go over my opponent's first contention. She states that it's empirical that 'small compliances' result in major, long term benefits, but we can already see that this is not true with my first refute. Just looking at this logically, it is quite obvious that as there is an appreciation in the Chinese yuan, competition increases between China and the United States, causing bad relations. The current bill that is being used to pressure Beijing to 'increase' its yuan is breaking world trade rules, which will only cause worse trade relations, relating to my first contention. The example that my opponent provides has a long way to go to show that the appreciation of the yuan (long-term) would even have these effects. Currently, the two countries may agree based on the fact that their economies rely heavily on each other. However, this is not going to be in the long-term, which is clearly what the resolution states. I prove to you that because of an increase of competition of the United States and according to the Indian Times, the head of macroeconomics of PWC, John Hawksworth states that in the long-run, China will easily overtake the United States' economy at least by 2020 and be way ahead by 2030 . This shows you that this definitely will not benefit the United States' in any way, but instead place the United States at a disadvantaged position with all trillions of dollars in debt to China.
Moving on to my opponent's last contention, I really don't understand my opponent's conclusion as to how the harming of the trade relations is ridiculous. The resolution clearly asks us to see if the appreciation in the Chinese yuan ULTIMATELY benefit the United States. Clearly, when the United States is up to its eyes in debt to China, but at the same time has a smaller economy compared to China, this is NOT beneficial. It is clearly better for the United States to have an equal standing with China for exports and imports or an upperhand. And when my opponent says that the government of China is never going to "shoot themselves in the foot", this just proves my point from my previous rebuttal. According to Businessweek, the appreciation of the yuan will not affect or narrow the United States' trade deficit because it is so substantial. The yuan strengthened 0.7 percent since June 19 of this year and the United States' trade deficit increased to $22.3 billion in May, the biggest since October.  This clearly shows again that an increase in the yuan DOESN'T affect the trade deficit. My opponent's argument doesn't really make sense because of this and additionally remember the arguments I present in the argument above. I understand my opponent's urgency on decreasing the trade deficit and the importance of it, but the appreciation of the yuan will not do what she predicts. Instead, it will again, as I have restated the increase in the yuan will not stop at the United States' convenience, but instead to China's. China will outgrow the United States' economy and place it at a huge disadvantage. What is the point of 'trying to fix' the trade deficit, when the in the long-term, the United States will be left in its huge amount of debt to China and have a non-productive economy compared to now? Additionally, my opponent's study taken in 2001 doesn't make sense since she uses it to try to prove the ridiculous point that China's trade relations will not be harmed since the United States invest a lot in China. Also, on to this point, according to the Stanford Examiner, even if yuan becomes expensive relative to dollar, our trade deficit may still not appreciably decrease. It all depends upon the sensitivity of our consumption to import-price increases, demand of our exports to price decreases in China and the response of our businesses to increase the supply of products demanded by Chinese consumers.
Now I am going to defend my case.
I am not trying to argue that the appreciation of the yuan is only 20%. If you reread my point in the earlier contention, you can see that is going to be more than 20%. The United States 'could' start out with a smaller appreciation in the yuan, but is not going to since the Bill that we are currently using focuses on more on a yuan appreciation of more than 20%. Really, this contention stands because as the yuan appreciates, the once undervalued currency will cause low-priced products to become more heavily priced. This will take a hard toll on U.S. consumers, since many rely solely on the cheap prices of labor and products from China. This will instead take a worser turn by just decreasing consumer spendings. Additionally, I find it very amusing that my opponent says my own evidence says that 'if the yuan rises by 5 percent against the greenback, employment and consumption in China will only drop by .74 percent and .57 percent while the trade balance will improve a whopping 3.47 billion dollars.' But, notice the number 5 percent. I've already shown you that with the current House of Representatives Bill that were using, China will instead have a 20% or more appreciation in the yuan. This clearly just goes for my point.
Now, remember that I never said that China will drive itself into a recession. I merely said that China will not shoot itself in the foot and instead decrease productivity of its own economy and the United States' in the long-run. It is not beneficial to the United States when China is able to gain the upperhand in trading internationally. Remember my evidence that says China will be able to become to hold the largest economy just be 2020 and by 2030 be far ahead compared to the United States. This gives China the opportunity to trade with many other countries and not solely rely mainly on the Untied States.
In today's debate round, you really want to focus on what the resolution says. We clearly see that the negative impacts of the appreciation of the yuan on the United States-bad trade relations between the U.S. and China, the U.S. being placed at a very big disadvantage, and the negative affects to United States consumers and businesses outweighs all of the arguments that my opponent presents.
I also ask my opponent to please post the evidence directly onto this debate in her next speech for convenience.
debatejpark forfeited this round.
joannejso forfeited this round.
1 votes has been placed for this debate.
Vote Placed by Ragnar 3 years ago
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