The Weak Yuan
China is now being charged with depressing the value of the yuan, its primary currency. With a weak currency, Chinese consumers would find it hard to buy goods made in other countries, and they would find it easy to sell their goods in other lands. Hence, the weak yuan would help promote a favorable balance of trade for China.
At first glance, the American consumer should cheer. Things “made in China” could be obtained at bargain prices with our strong dollar. But, hard to believe, the retail prices of things made in China, India, et al. are not cheaper than things “made in America.”
I discovered this many years ago, when I was the assistant president of the International Ladies Garment Workers Union. Apparel firms in America that were getting their wares made in Third World countries found fault with the union for its higher wage scale. They gave the impression that the same garment made in China, or India, or Mexico was a “bargain” for the consumer. We decided to put this claim to the test. We had committees do some shopping. They found racks of identical garments made for the same company in many lands. We checked the retail price. They were all the same, including garments “made in the U.S.A.”
At a convention of garment manufacturers, a top official boasted that “mark up” is the “name of the game.” If the cost of manufacture was $12, and the selling price was $24, he explained that such a 50% mark-up was fair.
Conclusion: With cheap, overseas labor and a weak yuan American companies can produce garments at low cost, but after the “mark-up” the price is no bargain.
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