Washington’s current campaign that Beijing should float its currency has been orchestrated in a manner that it obscures two hard facts. First, America has dominated manufacturing for years but does no more. Today, it suffers from disadvantage in manufacturing but China has a greater advantage and is exporting manufactured goods to the US which find a ready market there.

Second, these are election times in the United States and a high rate of unemployment is anathema for the Republicans and can upset President Bush’s applecart to remain in White House for another term.

Hence, search for a scapegoat and none more appropriate than China whose cheap goods are, as the argument goes, hurting America’s manufacturing sector and blocking new jobs. And the Republicans have been joined in the chorus by the Democrats as well.

The argument is that it is the pegged value of Chinese currency yuan (also called renminbi) which is contributing to the abnormal raise in US balance of trade deficit and the loss of jobs in American-based factories. China shares the largest portion of the US trade deficit — some $103 billion in 2002 and $120 billion in 2003.

No wonder, the noise in Washington continues even after Chinese President Hu Jintao’s categorical statement at the end of a meeting with President Bush in Bangkok on the eve of APEC summit that neither yuan shall be floated in the currency market nor will it be revalued.

The China-bashing became loud and bitter after the G-7 finance ministers, in a meeting held recently in Dubai, asserted that currency values be determined by the market forces. The reference was to recent intervention by central banks of China and Japan in the currency markets to prevent their currencies from rising against the US dollar.

Beijing is firm in its view that any deregulation of yuan would destabilise both China and the international economy. At present, its exchange rate is fixed at 8.3 to US dollar.

Meanwhile, a group of US Congressmen introduced a legislation in the Senate on September 9 that, if passed, provides for imposing a punitive 27.5 per cent tariff on Chinese imports unless yuan-dollar peg is abandoned.

The movers of the bill hoped that the Bush administration would act decisively before America loses additional jobs to what they called “an out-of-control China”.

In a Senate hearing on September 11, Congressmen from both sides presented themselves as “defenders of millions of jobs” they claimed had been lost to China.

The value of the yuan remains unchanged ever since it was pegged and it has nothing to do with the US job market. Even if the yuan is floated, it will only make Chinese imports costlier and reduce volume of their imports but not reduce the trade deficit.

Nor will it lead to creation of new jobs in factories because manufacturing sector in America has adequately shrunk. The hard fact is that either it is the application of new technologies that tends to cut manpower in large numbers within the United States or a consequence of transfer of production facilities to overseas by the United States corporations where they are able to exploit cheap labour because they find American labour too costly and too uneconomical. And they prefer to go to China.

An American Chamber of Commerce survey released on September 25 shows that 75 per cent of US companies operating in China made profits last year with 42 per cent of them making more than global average profits. Seven were among the top 50 exporters from China last year.

US giant Wal-Mart, for example, exports $12 billion in goods to the US from its Chinese operations which comes to 10 per cent of the US trade deficit.

America accuses China of deliberately keeping its exchange rate low simply because Beijing is out-competing everyone. It is not China’s exchange rate policy which has contributed to America’s huge trade deficit, says Joseph E. Stiglitz, the Nobel laureate and a “dissident” economist.

“It is Bush Administration’s unprecedented mismanagement. Tax cuts that Washington could ill-afford turned a huge fiscal surplus into a massive deficit. The result is that the US is borrowing, much of it, from abroad, and not saving.”

Much of this seems to run counter, says Stiglitz, to what was said by the IMF and Washington on the eve of East Asia crisis five years ago. Then, China was urged not to float its currency. Until Argentina’s currency (fixed at par with dollar) imploded, fixed exchange rates were considered fine.

The US Treasury welcomed government intervention in exchange rate markets and encouraged the IMF to support such interventions with mega-billion dollar loans.

China and Malaysia, he says, were brave enough to set their own course and lucky enough not to turn to the IMF. They did what every textbook said to do.

Stiglitz, whose commentary appeared in “The Guardian” on October 5, observed, “the harsh truth is that neither the IMF nor the Bush administration really believes in free markets. They interfere with markets when it suits their purposes.

Bush supported bailouts for airlines, unprecedented subsidies for agriculture and tariff protections for steel... the US administration wants to shift the blame but neither China, nor anyone else should be fooled.

This is reminiscent of what happened 20 years ago when President Reagan engineered huge tax cuts which led to huge trade deficits. Then, it was Japan which was blamed, now it is China.”

Meanwhile, a study jointly conducted by Jubilee Research and New Economics Foundation reveals that the accumulated external debt of the United States, the world’s richest country, is at present equal to $2.2 trillion.

This is almost the exact amount owed by the whole of the developing world, including India, China and Brazil — $2.5 trillion. In other words, three hundred million people in the US owe as much to the rest of the world, as do five billion people in all of the developing countries.

Moreover, while the developing countries have to make debt service repayments totalling more than $300 billions per year, the US has to only pay $20 billion per year to service an almost equivalent amount of debt.

The question arises if the United States happens to be the richest country on earth, why does it owe so much? The reason, according to the study, is that the United states has been living beyond its means.

Consumer greed over the past decade has been sucking imports into the country at a much faster rate than it has been able to generate exports to pay for those imports.

The US consumers have got used to cheap manufacturing products from Asia: cameras from Korea; cars from Japan. But they have not been producing goods that the rest of the world wants in return — last year, exports to the rest of the world were only at half of US imports.

Americans have, in short, been using the rest of the world’s production to go on a prolonged, and no doubt enjoyable, consumer binge.

Americans’ greed is taking its toll on the current account deficit.

The result is that the United States has at present the largest current account deficit in history, a staggering $445 billion or 4 per cent of US GDP, and this has been increasing at more than 50 per cent a year in recent years.

Economists at Goldman Sachs and Morgan Stanley are predicting that the deficit will rise even further over the coming years, and could reach $730 billion by 2006.

According to the IMF, continued financing of the United States deficit is sucking up 7.5 per cent of the world’s total savings, up from 2.5 per cent over the past two decades.