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Henry Paulson's negotiations with China are focused, in large part, upon a treaty banning "discriminatory practices" that block foreign investments in both countries. Funny thing that.
What
are the problems with the trading relationship? A trade
deficit. The U.S. buys too much, and sells to little. When
you buy too much, you sell off your assets to finance it. Thus,
other countries' investing here has grown tremendously. Warren
Buffet's prediction of a sharecropper economy here becomes more true.
What is discrimination in foreign investments? One person's
discrimination is another person's national security and national
economic strategy protections. Was it discrimination for the U.S.
to scuttle the sale of Unocal to CNOOC in the oil industry?
I don't want to tie our hands, preventing us from preventing
another sale.
And China has this on its mind:
China, on the other hand, charges that American officials have
been too quick to invoke “national security” to block its investments
in the United States. The Chinese also remain upset about the furor in
2005 when a Chinese government energy company tried to buy the Unocal
Corporation, an American oil company, but backed down in the face of
American criticism.
China has a national strategy to use its incomparable foreign
reserves buildup to finance acquisitions across the world. These
are national strategy acquisitions, not mere investments.
This blog piece
presented an innovative NY Times graph showing sovereign wealth funds
on a dual scale of secrecy and strategic interest. China was the
most secretive and most strategic.
I think we want to preserve a bit of discrimination ability.
Henry can focus on the currency misalignment, illegal subsidies,
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