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The question at issue here is What good would it do to remove China's privileged trade status? The answer is that it would do nothing but harm, add to inflationary pressures and cause unnecessary enmity.

Having Most Favored Nations status eliminates some of the import taxes that China would otherwise have to pay, it lowers the barriers to trade between our two countries. Eliminating this privileged status would not diminish the quantity of Chinese goods on the market, merely increase prices. China is manufacturing vast amounts of consumer goods. These will not simply disappear upon revocation of MFN status. The local Wal-mart will not suddenly run out of products to market.

At this time the average American enjoys a discount or roughly 5% on their daily purchases, thanks to Chinese goods. Lessening the competitiveness of Chinese goods means that the average American, and especially those struggling in this economy, will realize a cost of living adjustment upwards. In a time of economic struggle this would destroy those households already struggling.

With the Fed's concerns over inflation as it is at this time America can ill afford to cause price increases in Chinese goods. Causing more barriers to trade with China is simply counterproductive. The Federal reserve would harldy welcome a cost of living increase that exceeds 8%. If inflation is a concern now consider the magnitude of the situation if the CPI index were suddenly adjusted to reflect massive price increases in Chinese goods.

Finally, at a time when China is searching for its economic identity, embracing a two system economy, it would be against American interests to snub China. China has always adapted ideas from its neighbors and created a distinctly Chinese way of doing things. China's exposure to American business practices and capitalism has allowed it to assimilate American ideas, making it a far less of a hostile threat.

America and China are locked in mutually-assured economic destruction. If the United States sets about a course of punishing China or in any way placing trade barriers America will only succeeder in harming herself. China has the reserves and ability to weather a period of economic turbulence, but does the United States?

Learn more about this author, Daniel Xiao Wang.
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