A and Not-A
25 May 2006
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
Dear Editor:
AFL-CIO Secretary-Treasurer Richard Trumka says that an undervalued yuan increases both America's current-account deficit with China AND "the flood of investments by U.S and other multinational companies" into China (Letters, May 25).
This allegation reveals Mr. Trumka's colossal misunderstanding of international-trade concepts. America's current-account deficit with China grows as the volume of Chinese investments in America increases relative to the volume of American investments in China. How can the price of the yuan (or anything else!) cause Americans to invest less in China and more in China simultaneously?
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
Dear Editor:
AFL-CIO Secretary-Treasurer Richard Trumka says that an undervalued yuan increases both America's current-account deficit with China AND "the flood of investments by U.S and other multinational companies" into China (Letters, May 25).
This allegation reveals Mr. Trumka's colossal misunderstanding of international-trade concepts. America's current-account deficit with China grows as the volume of Chinese investments in America increases relative to the volume of American investments in China. How can the price of the yuan (or anything else!) cause Americans to invest less in China and more in China simultaneously?
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Sunday March 11, 2007 at 5:40pm