US ups ante on China

People with clout in the US want more aggressive measures - like China-specific trade tariffs - invoked against Beijing

WASHINGTON - A string of senior figures in the United States political and business community has voiced vehement criticism of China's unfair trade practices and demanded stern action be taken to rectify the situation over the past week.

The verbal assault was based on claims that China has sucked away much of the manufacturing base in the US and has skewed its trading rules to ensure that it continues to run a huge trading surplus with the US.

Testifying before the US-China Economic and Security Review Commission on Sept 25, Congressman Donald Manzullo thumped the table and roared: 'I am hot! The United States has been bled by the Chinese. And that's got to stop!'

Other senators, congressmen and trade experts echoed the passionate lamentations of Mr Manzullo and called for drastic steps, including the imposition of trade tariffs on Chinese imports to the US.

Even officials from the administration of President George W. Bush got into the act.

Referring to the alleged underhand tactics of the Chinese, Deputy Assistant Secretary of Commerce Henry Levine said: 'Americans are willing to compete on even terms with any country in the world, but we will not stand for unfair competition. We will not look the other way or wait idly.'

Most of the complainants waxed indignant about how China has not lived up to its obligations under the World Trade Organisation, which it joined on unique terms in December 2001.

Said Deputy Assistant US Trade Representative Charles Freeman: 'Rather than completing the process of implementing its WTO commitments as a pre-condition of membership, China was admitted to the WTO by committing to implement them.'

Many in the US assert that China has not come anywhere near to living up to these commitments.

In a clear barb against Beijing, the US Secretary of Commerce Donald Evans said: 'American manufacturers can compete against any country's white collars and blue collars, but we will not submit to competing against another country's choke collars.'

The most problematic areas in the impending trade war with China concern agriculture, services, enforcement of intellectual property rights and transparency.

As well, said Mr Freeman, 'China's use of certain tax policies to favour domestic production or provide incentives to increase exports has developed into a significant source of concern'.

Many US legislators repeatedly pointed out how thousands of jobs in the agricultural and manufacturing sector have been lost to China.

They said China was reaping a huge windfall in exporting its manufactured goods to the US, while making it difficult for US businesses to break into the Chinese market.

Last year, the trade imbalance between the US and China was a staggering US$103 billion (S$178.6 billion) and it is predicted to be even higher this year.

China's refusal to allow its currency, the yuan, to float freely according to normal free market practices came under sustained attack during last week's congressional hearings.

Said Senator Charles Schumer: 'Economists suggest that China's currency is undervalued by anywhere from 15 per cent to 40 per cent relative to the American dollar.'

'It means that American goods are artificially expensive for Chinese buyers,' he said.

That meant fewer US goods are being sold in China and more Chinese goods are being sold in the US.

Legislators claimed that this situation has gone on for far too long and they proposed a series of measures to fight back against China.

Mr Schumer and a group of his colleagues plan to introduce a Bill in the Senate that will impose a 27.5-per-cent levy on all imports to the US from China.

Senator Schumer said: 'There is no doubt that such a tariff is a blunt instrument, but previous experience shows that playing hardball works wonders in the world of international trade.'

While President Bush's administration would balk at such a measure, it must show sympathy for the need to take action against China and thereby stem the loss of jobs and revenue.

The economy will be a major issue in next year's presidential election and Mr Bush must be seen to be acting firmly to try to bring jobs back home.

Accordingly, the US Commerce Department will set up an Unfair Trade Practices Team to track, detect and confront unfair competition. Its principal target will be China.

Referring to Beijing's unfair practices, Mr Manzullo said: 'It's got to come to an end.'

If it does not, US legislators said that more aggressive measures like China-specific trade tariffs will be invoked.

And there are deep concerns that could spark a trade war between two of the world's trading giants.

I also find the continuing arguement of there go American jobs to be mostly ridiculous.

In other words, some jobs won't come back... but a lot, a WHOLE lot will. And when they come back because of our comparative advantage there will be many new jobs created that were not in existence before.

The idea of globalization is to find out who has comparative advantages and invest in those countries. China is playing so that they have a comparative advantage in everything and its not working for us or anyone else.

And when they come back because of our comparative advantage there will be many new jobs created that were not in existence before.

Until equilibrium is restored the former of those two will not come back. There is no painless way to do it. China is going to have to just take it. The corporations that invested up to their eyeballs in China will have to take it too.

The latter of the new jobs I referred to will not happen until the former come back to where they belong. We are looking at long term problems otherwise.

Where in Asia do our exports go? I know it is not South Korea, having witnessed the incredible protectionism there. Just look at how they managed to actually compete with Japan and America in the automotive market. But, I do not know if it is the other cheaper labor markets or if it is the rich countries like Japan (or as I like to call it the wolf in a kimono.)

If it is just corn then I do not mourn. Already the single largest subsidy in America is for corn more than $10 billion a year. Of course this is said to be hurting Mexican farmers who have seen 1/3 of the market place taken over by American corn since the advent of NAFTA. I hardly think that our highest single subsidy can be dwarfed by the Chinese. If this is the case the US really needs to rethink its spending, there is no country in the world that should be able to out spend us on anything. Once again though I do not think I am arguing with you so much as the article you linked to. The article to me sounds too much like one of those "free trade will solve everything articles." When it is not free trade that we want but to hold onto the advantage. Perhaps just a question of semantics but it is one that drives me nuts.

I have to respectfully continue to disagree that jobs will return to America. I have yet to see any hard evidence of this and believe that in fact no one will know unless something is changed. I just know that for the last half of the 20th century and the beginning of the 21st the continuing trend has been for corporations to go global finding cheap labor, land and goods. I believe this will continue to be the case. Just as trade imbalance figures often do not contain the fact that many goods bought in America from China are actually being produced and sold by American companies. I feel that often these China trade discussions continue to focus on China and not on the Corporations that are get rich at both ends at the expense of Chinese cheap laborers and American unemployed.

One last thing that I wonder on the job front is are Americans victims of our own success. We have a continually increasing productivity rating if I understand this correctly doesn't that mean that as we get better at our jobs we need demand to rise that much faster in order to continue to employ people. If demand does not rise fast enough but our efficiency continues to rise that means we produce enough but then have fewer jobs to go around.

Where in Asia do our exports go? I know it is not South Korea, having witnessed the incredible protectionism there.

BZZZ! Wrong again...

Respectful or not its simply wrong.

We sold $22.5 billion dollars worth of goods in Korea last year alone.

Here is the link to a US Census dept breakdown of what we exported to Korea for a 5 year term.

In fact, we exported more stuff to South Korea alone than we did to all of China.

Go to this list and pick the country you want to know about.

We sold 2.5 times as much stuff to Japan as we did to China.

Between S. Korea, Japan, and Taiwan...just those 3...we sold about $92 billion worth of goods in 2002.

If it is just corn then I do not mourn.

Its not just corn.

Just as trade imbalance figures often do not contain the fact that many goods bought in America from China are actually being produced and sold by American companies.

Check out this table. According to the US Census Dept 78% of our imports from China are from non-related party trade.

Here is the definition of non related party trade:

Related party trade:

Imports: As defined in Section 402(e) of the Tariff Act of 1930, related party trade includes transactions between parties with various types of relationships including "any person directly or indirectly, owning, controlling or holding power to vote, 6 percent of the outstanding voting stock or shares of any organization."

According to them...your assessment isn't true. It would be something to look into though.

Secondly, the trade imbalances are calculated as follows: If a US corporation owns and operates a company in China, the profits remitted back to the US are deducted from total amount we import.

So if we import $100 billion in goods, then our corporations in China remit $5 billion in profits from their companies in China.... the imbalance is stated as $95 billion.

I feel that often these China trade discussions continue to focus on China and not on the Corporations that are get rich at both ends at the expense of Chinese cheap laborers and American unemployed.

I will agree with a lot of that.

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