Hamlet without the prince

"If you're writing about any feature of the US/China economic relationship and not mentioning this currency issue, you're essentially writing Hamlet without the prince."

According to one economist, The New York Times article on Apple's production move to China leaves out the critical factor: exchange rates. Josh Bivens, acting research and policy director at the Economic Policy Institute, and author of Everybody Wins Except for Most of Us: What Economics Teaches About Globalization, says:

"...exchange rates are by far the single most important determinant of U.S. trade performance, so if the question is 'why isn't X made in the US anymore,' it's very likely that the answer remains 'the dollar is overvalued.'"

U.S. currency policy is driven by manufacturing and Wall Street in order to wring out every possible cent of profit. So, while the dollar fluctuates, China acts.

"As China intervenes to keep the value of its currency from rising against the dollar, this gives them an ever-increasing cost advantage versus the United States. The result is lots and lots of individual firm-level decisions (like Apple's) to produce in China rather than the United States (because the exchange rate makes it cheaper) and the sum of these individual decisions cumulate to a huge aggregate trade deficit."

Rather than tackle the impossible task of opposing Wall Street, government accedes to the wishes of capital, and instead concludes that the problem is one of worker education and training. But, it's impossible to really understand, for instance, Apple's move to China after 2002 by casting it simply as a skills or investment deficit.

"After all, there is an obvious trend in exchange rates and currency intervention that hamstring American competitiveness vis-a-vis China in the early-to-mid 2000s - but it's awfully hard to make the case that American workers just got a lot dumber at the same time."

How the U.S. Lost Out on iPhone Work (NY Times, Charles Duhigg and Keith Bradsher, January 21, 2012)
http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html/

Apple execs (like everyone else) overlook global exchange rates (Josh Bliven, Working Economics blog, Jan. 24, 2012)
http://www.epi.org/blog/exchange-rates-iphones-apple-usa-china/