Free trade and globalization do hurt some people and typically they are the ones whose jobs are outsourcable. But there are even more beneficiaries and they’re the ones whose standard of living improve thanks to walmart’s everyday low prices.

But I don’t think the game is necessarily over for the US. A friend works for Nestle’s baby food unit and chinese consumers love the products even though they charge a premium price but Nestle’s got the brand power that implies quality and chinese parents are known to be willing to give their kids the best. Another friend works for a company that makes equipment for biotech firms and thier innovative products again can charge a premium and innovation is not easily compromised by cheap labour.

What it means is that the game is not about the yuan like politicians say. Paulson understands that key is access to the growing chinese market for US companies and that’s what he’s going after. Assuming chinese authority is smart enough (I hope and think they are because they’ve got Japan’s history in front of them for what not to do) they will open up the market, albeit gradually.