You could say, as many do, that shipping jobs overseas is no big deal because the high-value work -- and much of the profits -- remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work -- and masses of unemployed?

Blue-collar workers can be retrained for white collar work: this rubric was a pinion of the argument of the 1980s justifying the trend towards a service-based economy. [Retrain 2 million fired since 2007?] But some men work with their hands and are unsuited to office or retail work. We see the effects of "re-training" throughout American society, as, for example, at big box stores where we see those who should be on a factory assembly line tending very badly to customers. [And I will no more than mention the generally poor English and math skills -- are these really high school graduates? -- and discourteous behavior of those who are supposed to tend to the customers who pay their wages...]

It is not only blue collar workers who have suffered. Over the past decade, many American white-collar executives -- genuinely capable business administrators -- have lost their jobs at age 50 or 55 and, without many possibilities for further employment in their speciality, find themselves compelled to "retrain," becoming full-time EBay sellers, elementary school teachers and even waiters. America's inefficient use of its own talent is, I find, the most shocking realization I have ever come to, and, while I acknowledge it in virtually ever nook and cranny of American life, I can not accept it. Neither should you.

Unlike yesterday's RILA announcement (see post below), Mr. Grove comes out with both fists swinging:

The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars -- fight to win.)

Read it all.

I often respond to press releases asking for further information. If I get what I'm looking for -- not an answer which agrees with me, but which illuminates the topic and allows me to write on it -- I make use of them. Today's post represents an exception: taking a press release as it is and simply announcing it. Or at least portions of it. I don't think I need much more to write on this subject.

We find ourselves awaiting, with bated breath [Shall I bend low and, in a bondman’s key / With bated breath and whisp’ring humbleness,..], the US Treasury Department's annual report. Is or is not China a currency manipulator? Year in and year out, the political gamesmanship has amused and frustrated, much like one might watch a Marx Brothers movie without sound. Inevitably, China is pronounced NOT a manipulator of its currency. This year's report has been delayed since the spring, as Sec'y Geithner waited, as many Secretaries of the Treasury have since time immemorial, for Chinese decision-makers to go the way of Washington.

Once again (here is a discussion of the bill offered in 2007 and one in 2009), Congress proffered in March a bill entitled the Currency Exchange Rate Oversight Reform Act, this time of 2010.

Alas, the play has once again run its course, the climax, reached. China made announcements of only superficial changes to its currency exchange policy and the proverbial ball is back in the American court. Here's how it should end: Treasury reports that China is not a currency manipulator and the bill dies. One doubts that the writers of this annual Everyman have penned a new ending. Pull the cord, bring down the curtain and send in the jesters!

Now come forth the lobbyists, having seen the play and loving it, who demand a replay of its traditional ending (which this Chinadrama critic believes the audience will find themselves applauding quite soon). And here is where the press release comes into play, because I have received one from the Retail Industry Leaders Association (RILA). RILA is

...a trade association of the largest and most successful companies in the retail industry. Its member companies include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales. RILA members operate more than 100,000 stores, manufacturing facilities and distribution centers, have facilities in all 50 states, and provide millions of jobs domestically and worldwide.

Phew! That's a big one (association, not paragraph). Quite clearly influential. The letter RILA sent to US lawmakers, which I was copied on -- many thanks to RILA's press officer -- was also signed by the following:

Advanced Medical Technology Association (AdvaMed)
American Apparel & Footwear Association (AAFA)
American Council of Life Insurers
American Meat Institute
Business Roundtable
Coalition of New England Companies for Trade (CONECT)
Coalition of Service Industries
Consumer Electronics Association
Emergency Committee for American Trade (ECAT)
Fashion Accessories Shippers Association (FASA)
Financial Services Forum
Financial Services Roundtable
National Chicken Council
National Retail Federation
Pacific Coast Council of Customs Brokers and Freight Forwarders (PCC)
Retail Industry Leaders Association
Securities Industry and Financial Markets Association
Sporting Goods Manufacturers Association
TechAmerica
Travel Goods Association (TGA)
United States Association of Importers of Textiles and Apparel (USA-ITA)
U.S. Chamber of Commerce
US-China Business Council

[Note that last one there.]

Down to brass tacks: what does the RILA have to say to American lawmakers about China and currency manipulation?

RILA: ...we urge [lawmakers] to reject legislation that sanctions the application of antidumping and countervailing duties to address the U.S.-China exchange rate.

Why?

1) Antidumping or countervailing duties on Chinese imports are unfair.

RILA: Estimations of the "correct" currency value would be inherently subjective, unilateral and potentially politicized since there is no agreed upon method to determine what a country's exchange rate should be in the absence of a market-based determination.

But China wishes to control the value of its currency, has done so "forever" and will not move unless doing so is in its interest, which it is not.

2) The act is unlawful under international law and China could challenge us.

RILA: The proposed legislation would also appear to violate the United States' commitments under World Trade Organization (WTO) rules governing the calculation of antidumping duties and the types of subsidies that are subject to countervailing duties.

I think we need a specialist to argue this point. It is beyond my knowledge to comment. But, is it not in the interests of the United States to clarify the legality of its duties at a world body established for that purpose, rather than to pick up its own gauntlet before it is even thrown down?

3) The exchange rate doesn't matter.

RILA: ...the United States' non-market economy antidumping methodology already adjusts for currency undervaluation, as margins are calculated using market-based values from a third country and does not use Chinese costs or prices.

At least, I think that is what this sentence means. Clarification from RILA might help.

4) Pressing China will succeed.

RILA: ...work multilaterally and bilaterally to press China to allow market forces to determine the value of its currency.

No, this methodology has not worked -- over DECADES -- and it won't. Not unless Chinese decision-makers see that doing so is in their interest. Yes, we see far greater influence upon decision makers from non-state, i.e. "market" forces now than we did 30 years ago, but only because there was no market other than that which the state had created. (Whatever changes Westerners foolishly believe they have brought about in mainland China -- in the legal system, and education, and the arts -- these are slim accomplishments and, in my humble opinion, of little to no account.) Chinese decision-makers will exert control wherever they have the capacity to ensure that control remains in their hands. In other words, they will never "cave." At least, that is my reading of the top men. They will move as other powers wish them to only in the face of a crisis of extraordinary proportions and no other choice appears to suit their interests.

The U.S. Embassy in Beijing, along with four U.S. consulates general across China, is opening on Saturdays over the next few weeks to accommodate thousands of Chinese travelers seeking visas to visit the United States.

Trade, commerce, people-to-people exchanges, and tourism between China and the United States have grown dramatically over the past couple years. In 2009, U.S. consulates in China issued more than 487,000 visas to Chinese travelers. Sixty-six percent of these visas were for business and tourism. Growth in 2010 has been even more dramatic. China’s 2010 visa load is up 28 percent over the same period last year.

“We’re excited about the extraordinary growth in visa demand in China and what it means for our countries’ deepening economic and interpersonal relationship,” said Janice Jacobs, Assistant Secretary of State for Consular Affairs. “We expect this trend to continue and are actively increasing staffing in our Embassy and consulates. We also introduced new technologies to improve our efficiency while providing more convenient procedures for applicants.”

“While we’re pleased about increased Chinese interest in traveling to the United States, we are not pleased by the increased wait times for a visa appointment,” observed U.S. Ambassador to China Jon Huntsman, Jr. “We applaud the efforts of our Consular staff and the Bureau of Consular Affairs to think creatively and boost resources to help clear the backlog. I witnessed our team's dedication when I visited the Consular Section last week."

The penultimate sentence of Mr. Huntsman's comment says it all, don't you think?

The yuan was quoted at 6.8015 to the dollar in China's over-the-counter market Monday afternoon, up strongly from its opening level of 6.8261 and its close on Friday at 6.8262. The 6.8015 level was the yuan's strongest against the dollar since the 1980s, before the currency was allowed to be traded as part of China's market-oriented reforms.

WSJ is plain wrong. In 1the 1980s and early 90s, before the FEC system was scrapped, the RMB and the FEC were pegged at rates ranging from 3:1 to 5.8:1. What was an FEC? It was an artificial sub-unit of currency, based on the value of the dollar, usable only by foreigners to transact business in China. Yes, a dual track system of currency. (I still have a few of these tiny FECs, which look like the old tobacco coupons you'd find in a pack of Chesterfields.)

My earliest recollection of my actually selling US dollars is around 1984 or 1985, at which time the official exchange rate between the USD and a foreign exchange certificate (FEC) -- exchange into RMB was forbidden -- pegged the dollar at 3 FECs. I remember my Japanese company colleagues changing $1.00 at this rate in order to get a receipt to submit to the expenses department. The unofficial rate -- on the black market -- was far more profitable: I remember negotiating on the streets of many cities for as many as 6 FECs to the dollar and treble that amount if I wanted RMB. It was technically unlawful to hold and spend RMB, as a foreigner, but nobody cared. High-level officials routinely asked me to exchange dollars for RMB with them.

It is true that, after the FEC system was scrapped in 1994, at times, one could get as many as 7.2 or 7.3 RMB for every dollar -- in my experience -- but only on the black market. Compare the official mid-80s rate of 3 or the 1994 rate of 5.7 to today's 6.8015, the so-called "highest in the modern era." WSJ should issue a correction.

As a parting comment, read this quote from the WSJ article itself and then re-read the article headline:

The central bank's unchanged central parity rate Monday may have been aimed at tripping up speculators, signaling that a steadily appreciating yuan isn't a sure bet.

Highest in modern era? Unchanged central parity rate? A change of 0.3% a significant rise?

Because I have been writing for nearly a DECADE-- and saying it to anyone who will listen since the mid-90s -- that the RMB will move only when Chinese decision-makers find it in their interests to do so, and even then, not greatly. And now is not the time. Nor is the future.

While I do find reading him worthwhile, the "poisonous criticism" to which Mr. Batson refers is not poisonous at all. It is toxic, but only as an opiate. It must be understood by negotiators on both sides that China will insist on maintaining its stance and the US will do nothing to further its own interests, but merely whine, and, thereafter, revert to its usual position of indignant inertia. With such purchasing power, the buyer known as the United States has a helluva lot more clout that it ever uses. Are we simpletons?

You've got to admire the boldness of the ministerial commentary:

Vice Foreign Minister Cui Tiankai said the yuan "is China's currency and this is not an issue the international community should discuss."

All the while, Treasury Secretaries say much the same thing, time and again. This year, it's:

"I think the strength, the sentiment in the Congress on this is overwhelmingly strong," Mr. Geithner said at last week's hearing. "I think it's important that China understands that."

[UPDATE: PBOC confirms. As I have expected all along -- how many over the years have seen this as I have? a bare handful? -- the ball has been sent back resoundingly into the American side of the court. Here's what I expect from the US: whiff!]

Notice the safety harness? Apparently the father, leader of the troupe, has high hopes for the girl.

Here's raw video where you can hear very interesting comments (in Chinese) from spectators.

But when I see, the day after a pointed question asking when Secretary Geithner will "press China on trade," an article entitled, "U.S. to Press China on Trade Geithner Will Seek Freer Markets in Beijing Talks; Euro Crisis Damps Yuan Issue," it is almost as if this maverick voice in the wilderness has been heard.

Alas, not. A search of "geithner press china trade" returns articles delineating administration plans to influence China from late 2008, at which time Mr. Geithner was installed as Secretary of the Treasury. I do not even wish to search for the names of other Secretaries in conjunction with "press china trade," or any confluence of similar words. That would be a sheer waste of time. We all know how "pressing" this issue has been for this (and other) administrations.

[For those not born and raised in the U.S.: Maverick, in the link above, is a cartoon character, the silent, ever-nodding in agreement sidekick to Yosemite Sam. A lovable character, co-starring in "Oily Hare," one of my personal favs. However, a maverick is really an unbranded animal, free to roam the range, from which the term has come to mean "a free-speaker" in the best American sense.

This rhetoric appears to have turned against its purveyors. Chinese exports to the EU have suffered.

This quote, reminding me of Chinese attempts to find holes in shipping and L/C documentation to avoid payment on goods when currency movements made orders suddenly unprofitable, sounds like the shoe is now on the other foot:

“We have been receiving calls from some European clients who signed contracts with us earlier this month, and they all want to cancel their orders, since the depreciation of the euro has eroded all their margins and then some,” said Elvin Xu, the sales manager of Guangdong Ouyi Electrical Appliance in Zhongshan, China, which makes gas stoves, heaters and water heaters. “They say they cannot increase the prices at their end to their customers, given intense competition in their marketplace.”

In addition, in March, Chinese purchases of US long-term securities "rose 2 percent to $895.2 billion, the first increase since last September."

Weakness is evident in the Chinese position. So, where is Secretary Geithner and what of the administration's reported push to free the reins upon the RMB?

The model for the upcoming shift in currency policy is China’s move in 2005, when the leadership allowed the renminbi to jump 2 percent overnight against the dollar and then trade in a wider daily range, but with a trend toward further strengthening against the dollar. For the upcoming announcement, however, China is likely to emphasize that the value of the renminbi can fall as well as rise on any given day, so as to discourage a flood of speculative investment into China betting on rapid further appreciation, they said.

The Obama administration is likely to take credit for whatever happens. But when you hear a loud pop and feel hot air on the back of your necks, you will know the announcement has been made.

The implication of that thinking [that the internet is a political space], post-Google, is that companies that want to be major players on the Chinese Web will have to prove their political fealty to the leadership, much as traditional media companies do. “Chinese companies have to be collaborators,” Mr. Xiao said.

"Post-Google?" When was it ever not the case? Have I been barking at the wind all these years?

[INTERNET VENDOR UPDATE] Go Daddy discontinues registration of .CN domain names.

In prepared testimony viewed by The Wall Street Journal, Go Daddy Executive Vice-President Christine N. Jones said the company was "concerned for the security of individuals" affected by the government demand for people to sign up for Internet registrations with a full photo identification.

"Water doesn't boil if it is heated to 99 degree Celsius. But it will boil if it is heated by one more degree," he said. Likewise, "a further rise in the yuan by a very small magnitude might cause fundamental changes" to exporters in China, he said.

八九不離十啦！ [Translation: Six of one, half a dozen of the other.]

The Minister's statement represents a curious tactic -- we may see the Vice Minister removed for it (fingers crossed) -- as close to an official proclamation that the "boiling point" of the Chinese economy is at hand. One should note that an egg will still hard-boil at 99°C.

The remainder of the interview is typical clap-trap worth reading for sheer delight.

WSJ reports Google throwing in the towel -- or at least leaking the rumor that it will, by publicly threatening immiment closure of its Chinese language search engine. A few posts ago, I strongly suggested this was likely, given the company's extraordinary intransigence before those select few who have no need to back off.

Google's closure of Google.cn would leave the Internet in China—which has about 400 million users, more than any other country, and is adding 250,000 each day—almost entirely dominated by local companies.

[Our old friend Jeremy from Danwei.org is quoted in the story.]

See also this report:

Google Inc. advertisers in China are being advised to switch to rivals such as Baidu Inc. and business partners are exploring alternatives as speculation grows the U.S. company will shut its Web site in the country.

Why is it Americans fail to effectively respond in kind with Chinese firms? Because, in short, standards differ.

Google's departure could hardly be better news for the Standing Committee of the Politburo. One can imagine the round-table where a hypothetical thorn in the side is discussed...

A: On to that damn company....

B: Who is the boss? Can we shoot him?

C: No. It would be too messy. The whole world is watching.

B: It is your job to persuade the world that the execution is justified!

D: My son-in-law has internet interests. I think the stock would go down. You own stock in that company, too, don't you?

C: I do, and many others in that commercial sphere.

A: Yes, yes, the stock will fall. No execution. Agreed?

All: Agreed.

A: Force them to leave the Motherland.

B: Yes, be as hard as nails. Attack from all sides.

E: Sirs, the company has just decided to withdraw from China.

All (in a flurry, picking up cellphones): Buy Baidu! Buy Sohu! Buy Sina!

Humor aside (if, in fact, you considered the above dialog to be humorous), Chinese media is forbidden territory for foreign firms -- its control is of such value to the Party's propaganda as to overwhelm whatever social benefit Westerners, such as Google and its executives, believe to have perceived. And frankly, if Chinese value such ideals, and wish to adopt them -- which I do not believe to be the case for the majority of mainland Chinese -- it is for them to overturn the ideas which Westerners (and some Chinese) believe oppress them.

However, apart from higher notions of God-given rights, and turning strictly to commerce, the US is a far more open environment for the activities of Chinese nationals than is China for American nationals. As an example, thousands of Chinese nationals, even those without immigrant status in this country, are licensed to practice law in many of these United States. No American, who is not a Chinese national and thus subject to heightened discipline by the Chinese state, is permitted to be similarly licensed.

Whither parity?

All of this occurs while a substantial portion of China's foreign exchange reserves are in the hands of the US government -- all of it eminently confiscatable.