Beijing's threats fuel U.S. protectionist rhetoric

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For starters, this legislative Remedy is based on seriously flawed macroeconomic analysis. China bashing doesn't address the real problem that Capitol Hill believes is bearing down on American workers. A multilateral trade deficit hit a record $836 billion in 2006. Since the Chinese bilateral deficit of $232 billion amounted to the largest slice of the overall trade gap'28% for all of 2006 and fully 34% in the final period of the year? Congress has concluded that China is the major culprit behind the trade-related squeeze on middle-class American workers. That overlooks one key point: The United States runs trade deficits not because it is victimized by unfair competition from China or anyone else but because it suffers from a chronic shortfall of domestic saving. That's right, lacking in saving. As evidenced by a net national saving rate that plunged to a record low of 1% of national income over the 2004-06 period? The US has no choice other than to import surplus saving from abroad if it wants to keep growing. That means running current account and trade deficits in order to attract the foreign capital. China turns out to be the biggest piece in this equation not because it is unfairly undercutting American-made products but because its menu of products satisfies the tastes and preferences of a chronically saving-short US economy. China bashers continually overlook the macro context of America's bilateral trade deficits at great peril.