COUNTER-POINT: China might counter that its large balance of trade surplus with the U.S. has been du

COUNTER-POINT: China might counter that its large balance of trade surplus with the U.S. has been du

COUNTER-POINT: China might counter that its large balance of trade surplus with the U.S. has been due to the differences in prices between the two countries, and that it should not be blamed for the high U.S. prices. It might argue that the U.S. trade deficit can be partially attributed to the very high prices in the U.S., which are necessary to cover the excessive compensation for executives and other employees at U.S. firms. The high prices in the U.S. encourage firms and consumers to purchase goods from China. Even if China’s yuan is revalued upward, this does not necessarily mean that the U.S. firms and consumers will purchase U.S. products. They may shift their purchases from China to purchase products in Indonesia or other low-wage countries rather than buy more products from the U.S. Thus, the underlying dilemma is not China, but any country that has lower costs of production than the U.S.

WHO IS CORRECT? Use the Internet to learn more about this issue. Which argument do you support? Offer your own opinion on this issue.China is not the only country using currency intervention, name others and how they are using currency intervention?

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