On Fri, 21 Nov 2003 11:54:19 GMT, Gunner wrote:
On Fri, 21 Nov 2003 05:27:42 -0500, Gary Coffman
wrote:

Well, economists are saying that the yuan is about 30% overvalued.
So if it were allowed to float free, a Chinese machinist would have to
be paid the equivalent of $1.30 an hour instead of $1.00 an hour to
make the same amount he is now making. That's still far below the
$15 an hour a US machinist demands.

Gary

But what is the buying power of that $1.00 as opposed to the US
machinists $15?

A US dollar is a US dollar. It has the same buying power no matter
who holds it. That's why such things as wages and prices in different
places are converted to dollars before comparisons are made.

In other words, Chinese vegetables cost the same for the Chinese
machinist as they'd cost for the US machinist (plus shipping, of course).
And conversely, US vegetables cost the same for the US machinist as
they'd cost for the Chinese machinist (plus shipping of course). Same
for Korean TVs, Tiawanese computers, US cars, etc, etc, etc.

In other words, if they're buying the *same* products from the *same*
suppliers, the only difference is shipping costs. Where it gets complicated
is when they're buying different products from different suppliers. That's
where a lack of free trade can make large differences.

For example, the US machinist is paying a 30% premium for steel, and
US products made from steel, thanks to the illegal tariffs imposed by
the US government. The Chinese machinist is paying a nearly 400%
premium on gasoline compared to the US machinist, thanks to a punitive
tax on gasoline in China. Etc.

In very general terms, for a market basket of Chinese domestic goods,
the Chinese worker is getting about 4.7 times as much for his dollar as
the US machinist is for a similar (but not identical) market basket of
US domestic goods.

Gary