The NY Times business section I think specializes in conventional wisdom...it's article on the backfire effects of the rising yuan was something that was mentioned on this blog at least 4 months ago...
Most analysts have already figured out that the yuan's climb so far has been insignificant. But some of the most ardent advocates of yuan revaluation are still hoping for an appreciation of 6 to 7 percent a month in the currency, the maximum drift that the Chinese central bank will allow, according to its original announcement. Senators Charles E. Schumer, Democrat of New York, and Lindsey O. Graham, Republican of South Carolina, are aiming for a total appreciation of around 27.5 percent. M. Brian O'Shaughnessy, chief executive of Revere Copper Products in Rome, N.Y., said he needed 40 percent immediately. "Otherwise, it won't have any impact," he said.
But even a yuan revaluation of 40 percent wouldn't significantly improve the overall balance of trade of the United States. For that to happen, the currencies of other developing countries would have to rise in tandem. If they didn't, the loss of competitiveness of Chinese manufacturers would move Americans to buy their products only from low-cost countries like Bangladesh, reallocating, but not reducing, America's external shortfall.
"The dollar has to fall not only against China but against the whole trade-weighted basket," said Barry Eichengreen, a professor of economics at the University of California, Berkeley.
Still, assuming against all odds that all this happened, what would the results be for the American economy? Nicholas R. Lardy, a China expert at the Institute for International Economics who has been calling for the yuan to rise, says some American manufacturing jobs could be saved.
He acknowledges that it wouldn't help all industries. Much of the less complex stuff that Americans buy from China is no longer made in the United States. Some of it moved to Japan a long time ago. Then Japan lost that manufacturing to South Korea, and South Korea lost it to China. It's unlikely that the United States will ever recover it, he said.
Yet for manufacturers of products like semiconductors or molded plastics - which aren't so low tech that they moved overseas long ago, but are not so high tech that labor costs are of no relevance - a currency shift of 20 or 25 percent could be important. It could make the difference between staying in the United States, where the going wage for a manufacturing worker averages about $16.50 an hour, or moving to China, where it is nearer to $1.25 an hour.
Two words sums up the obsolecence of this position: peak oil.
All this globalization is predicated on the assumption of cheap energy to move goods around the world, and to power lots of servers to outsource internet based services.
What happens when the energy becomes very expensive?
Which is bigger - labor costs or energy costs? Depends on the industry.