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During the first six months of this year, China surpassed the United States as being the world’s largest exporter. Only five years ago, the United States exported more than double the amount of China. During the first half of 2006, Chinese exports of manufactured goods reached $404 billion compared to $367 billion in exports by the United States.

"This dramatic reversal, together with the increasingly high-tech orientation of Chinese exports, poses a serious challenge to U.S. export competitiveness and long-standing leadership in technological innovation," writes Preeg.

The composition of Chinese exports is undergoing a "structural shift" away from labor-intensive products to high tech and value-added goods. Chinese exports of textiles and apparel declined to 14.6 percent of total exports during the first half of 2006.

China’s trade surplus in manufactured goods increased to $128 billion during the first half of 2006, an increase of $43 billion over the same period of 2005. China’s trade surplus in information technology products has more than doubled from the first half of 2004 to the first half of 2006, from $18.8 billion to $44.8 billion.

China’s large and growing external trade imbalance "foreshadows what will be a difficult and potentially disruptive adjustment for the Chinese economy, again concentrated in the manufacturing sector," warns Preeg. "It will certainly be a central subject for discussion at the IMF and World Bank annual meetings in September and will trigger congressional action to impose tariffs on imports from China unless the yuan is promptly revalued."

Exports of mechanical and electrical products during the first half of 2006 reached $244 billion, "more than two and one-half times larger than the $91.5 billion of labor-intensive exports," according to Preeg. The "hi-tech products" category recorded exports of $123.5 billion, also higher than the labor-intensive category. "The highest growth sectors during the first half of 2006 were other transport equipment (68 percent), telecommunications equipment (40 percent), auto parts (37 percent), scientific instruments (36 percent), electrical machinery and parts (34 percent), and machinery, except electronics (31 percent)."

The data also reflect another fundamental change in Chinese manufacturing. For years, China imported large quantities of parts and components and its cheap labor shops were used as a platform for final assembly. But the share of imported content "is not nearly as large as sometimes reported, and the share of Chinese value added is rising steadily," writes Preeg.

Foreign firms manufacturing in China are buying more of their parts from local suppliers. Large companies are providing suppliers with training, technical support and systems for improving quality. "One Japanese automotive company is in the process of increasing Chinese value added from 75 percent to 95 percent, as a result of almost all of its Japanese parts suppliers shifting production to China," says Preeg. "The Chinese export platform issue…has been largely a myth."

If Chinese exports continue growing at their current pace, then Chinese manufactured exports will be more than double those of the United States in five years, Preeg points out. "This dramatic reversal defines the bottom line challenge to U.S. export competitiveness."

Preeg implores policymakers to be alert to the major economic consequences of such a development. "The very large and growing Chinese current account surplus, linked to other large surpluses throughout East Asia and the counterpart U.S. deficit, have created the greatest and most threatening imbalance in the global economy since the Second World War. If steps are not taken to restore greater balance, a market-induced adjustment could have serious impact on the global economy."

China’s projected current account surplus this year of $230 billion represents 9 percent of China’s GDP. Combined with other East Asian countries, Asia’s current account surplus will run about $500 billion this year, while the U.S. current account deficit will top $800 billion — or more than 7 percent of U.S. GDP. Yet despite repeated warnings, U.S. and Chinese policymakers have done nothing to address the growing imbalance.

A major revaluation of the yuan of between 25 percent and 50 percent will be painful but necessary. The IMF can no longer ignore the issue, particularly since Article IV of its charter states that "members should avoid manipulating exchange rates…in order…to gain an unfair competitive advantage." The IMF charter defines currency manipulation as "protracted large scale" purchases of foreign exchange by central banks.

"Can there be any question that the Chinese purchases of $200 billion a year are not protracted and large scale?" Preeg asks in the paper entitled "China’s Surging Trade Surplus Being Driven By High-Tech Manufactured Exports; Policy Consequences of the Growing Imbalance," available for purchase by calling 703-841-9000.

Mainstream politicians and press critical of U. S. involvement in Vietnam and Iraq have always emphasized American losses in lives and treasure as the primary reason for disengaging from conflict.  George McGovern was the exception that proved the rule when he astonished the few listeners who hung on until 3 AM to hear him include in his nomination acceptance speech this reason for withdrawing from Vietnam:

There will be no more Asian children running ablaze from bombed-out schools. There will be no more talk of bombing the dikes or the cities of the North.

More typical is John Kerry’s rhetoric urging a timetable for bringing American troops home from Iraq: A few weeks ago I departed Iraq from Mosul. Three Senators and staff were gathered in the forward part of a C-130. In the middle of the cavernous cargo hold was a simple, aluminum coffin with a small American flag draped over it. We were bringing another American soldier, just killed, home to his family and final resting place.The starkness of his coffin in the center of the hold, the silence except for the din of the engines, was a real time cold reminder of the consequences of decisions for which we Senators share responsibility.

Underlying Kerry’s choice of imagery is the assumption that American lives are more precious, that Americans are exceptional.

But that dearly-held, Ameri-centric view may be fading away.  The evidence of the erosion of the idea that  Americans enjoy special privilege in this world comes from a surprising source.  The decades-long efforts of the antiwar left to get people in the U. S. to have concern and compassion for the people upon whom American bombs fall seems finally to have caught hold of the current Secretary of the Air Force, Michael Wynne.

Secretary Wynne showed a stunning preference yesterday for using new high-power microwave weapons for domestic crowd control as a way of testing the possible side effects of the devices: ”If we’re not willing to use it here against our fellow citizens, then we should not be willing to use it in a wartime situation,” said Wynne. ”(Because) if I hit somebody with a nonlethal weapon and they claim that it injured them in a way that was not intended, I think that I would be vilified in the world press.’"

This is the Secretary of the same Air Force that dropped millions of tons of Agent Orange on Vietnam and untold tons of uranium-depleted shells on Iraq.  Has Wynne been reading too much Noam Chomsky?

Michael Wynne hasn’t become  a peacenik.  He is merely the advance guard of the forces now sloshing their way across America’s constitutional and, more importantly, cultural Rubicon.

The Roman Republic barred its military leaders from bringing their legions across that watery boundary so that Roman troops would never be used against Roman citizens.  While the legionnaires were free to butcher men, women and children anywhere else in the Mediterranean world, citizens of Rome enjoyed special privilege.  They were immune until Julius Caesar brought his legion across that famous river, causing the Roman Senate to flee in fear and bringing the Roman Republic to an end.

America has now reached the point where its ruthless leaders so despise its people and its press that they feel it is safer politically to test dangerous new weapons on protestors and unruly crowds in the U. S. than in the streets of Baghdad or Ramallah.  Like Joseph Stalin and Saddam Hussein, they have complete confidence that they can do whatever they like within the boundaries of the country they rule.

Many of us have wished for the death of the myth of American exceptionalism, but few could have foreseen its end announced by an Air Force Secretary who urged his own government to "nuke" Americans first.

Nearly 58,000 Americans were killed in the Vietnam conflict along with more than a quarter million South Vietnamexe and other allied soldiers.  The Vietnamese government puts the official military death toll at 1.1 North Vietnamese and Viet Cong.  Civilian deaths are estimated at 2 million to 3.5 million.

9/11 attacks: 3,030 deaths .

More than 2,600 U. S. troops have been killed in Iraq.  Estimates of civilian deaths range from 50,000 to 150,000 plus 55,000 insurgents.  The Economist estimated that as many as 360,000 children died in Iraq prior to the war as the result of sanctions imposed at the urging of the U. S.

http://www.cnn.com/2006/US/09/12/usaf.weapons.ap/index.html

CNN published an article today announcing that the US Air Chief, Secretary Michael Wynne. said, "Nonlethal weapons such as high-power microwave devices should be used on American citizens in crowd-control situations before being used on the battlefield"

The object is basically public relations. Domestic use would make it easier to avoid questions from others about possible safety considerations. Read the article on CNN

Former U.S. vice-president Al Gore said South Australia’s focus on renewable energy has made the state a world leader in the battle against global warming. Full story

`The first drafts of history are fragmentary. Important revelations arrive late, and out of order. In this timeline, we’ve assembled the history of the Iraq War to create a resource we hope will help resolve open questions of the Bush era. What did our leaders know and when did they know it? And, perhaps just as important, what red flags did we miss, and how could we have missed them? This is the first installment in our Iraq War timeline project.’ On the MotherJones web site

An extract from the timeline: 

`Officals in the Bush Administration come together to prepare for Secretary of State Powell’s February 5 2003 speech to the U.N, in which Powell will put all credible US evidence on the table and make the case for war to the international community. Powell reads an eary draft and throws several pages in the air and exclaims `I’m not reading this. This is bullshit.’