BRUSSELS, May 28 (Xinhua) -- The United States is making a "serious mistake" in bashing China, making others the scapegoat for its own economic problems the way it did to Japan three decades ago, said a leading U.S. economist.
Comparing the U.S. suppression of China to "a remake of a movie" in the 1980s, in which the United States wielded its big stick of tariffs against Japan by portraying it as the "greatest economic threat," Steven Roach, senior fellow at Yale University's Jackson Institute of Global Affairs, said in a recent article that "China bashing today is an outgrowth of America's increasingly insidious macroeconomic imbalances."
In the article posted on the Prague-based Project Syndicate website, Roach, also former chief economist at Morgan Stanley, recalled that back in the 1980s, Washington accused Japan of intellectual property theft, state-sponsored industrial policy and hollowing out of U.S. manufacturing. "Thirty years later, Americans have made China the villain," said the article.
However, according to the economist, America's so-called trade problem was "very much of its own making," as the country has "little or no appreciation of the link between saving and trade imbalances."
With the net domestic saving rate in January 2017 at just 3 percent, the tax cuts by the current U.S. administration widened the federal budget deficit, which more than offset the cyclical surge in private saving that normally accompanies a maturing economic expansion, the economist analyzed. "As a result, the net domestic saving rate actually edged down to 2.8 percent of national income by late 2018, keeping America's international balances deep in the red."
As regards the U.S. trade deficit with China, which was typically cited by Washington as an excuse for the China bashing, Roach said that data from the Organization for Economic Cooperation and Development (OECD) and the World Trade Organization (WTO) suggest that about 35-40 percent of the bilateral U.S.-China trade deficit reflects inputs made outside of China but assembled and shipped to the United States from China.
That means the made-in-China portion of today's U.S. trade deficit is actually smaller than Japan's share of the 1980s, he noted.
Like the Japan bashing of the 1980s, today's outbreak of China bashing has been conveniently excised from U.S. broader macroeconomic context. That is a serious mistake, he wrote.
Roach warned that without raising national saving, which is highly unlikely under the current U.S. budget trajectory, trade will simply be shifted away from China to other trading partners of the United States.
"With this trade diversion likely to migrate to higher-cost platforms around the world, American consumers will be hit with the functional equivalent of a tax hike," he stressed.
According to Roach, the structural barrier to tackle the root cause of the U.S. goods trade deficit is high, as "there is no U.S. political constituency for reducing trade deficits by cutting budget deficits and thereby boosting domestic saving."
"America wants to have its cake and eat it, with a health-care system that swallows 18 percent of its GDP, defense spending that exceeds the combined sum of the world's next seven largest military budgets, and tax cuts that have reduced federal government revenue to 16.5 percent of GDP, well below the 17.4 percent average of the past 50 years." said the article.
"This remake of an old movie is disconcerting, to say the least. Once again, the U.S. has found it far easier to bash others -- Japan then, China now -- than to live within its means," Roach wrote. "This time, however, the movie might have a very different ending."
