China's Oil Bid Riles Congress
Friday, June 24, 2005
Political fears of China's economic might intensified yesterday following China's unsolicited bid to take over a U.S. oil company, with lawmakers from both political parties warning that Congress will take retaliatory action against Chinese trade practices if the Bush administration fails to respond.
Under a barrage of questions, Federal Reserve Chairman Alan Greenspan and Treasury Secretary John W. Snow warned the Senate Finance Committee against punitive legislation that could trigger a trade war and ultimately harm the U.S. economy.
"Resorting to isolationist trade policies would be ineffective, disruptive to markets and damaging to America's special role as the world's leading advocate for open markets," Snow said.
But the $18.5 billion bid Wednesday by China's third-largest oil producer to buy California-based Unocal Corp. put such sentiments on weaker ground. Already, lawmakers from both parties had stockpiled bills to punish China, and President Bush's ongoing effort to ratify the Central American Free Trade Agreement had stirred up political forces against further trade liberalization. Lingering discontents about the economy had poli-
ticians looking for a new outlet to voice their concerns. The bid by a state-run Chinese oil company to swallow a U.S. competitor "threw gas on the fire," said Sen. Lindsey O. Graham (R-S.C.), who has coauthored legislation that would impose a 27.5 percent tariff on Chinese imports unless China allows its currency to rise in value.
"Fighting back is not protectionism," Graham told Greenspan and Snow. "No more saber-rattling. We want results."
The takeover bid by China's state-controlled CNOOC Ltd. may have been the clearest sign yet of an emerging economic power's global ambitions, but it came at an inopportune time.
The Senate is set to vote July 27 on the currency tariff bill, coauthored by Graham and Sen. Charles E. Schumer (D-N.Y.). Momentum is building on legislation, written by Sens. Susan Collins (R-Maine) and Evan Bayh (D-Ind.), to allow the Commerce Department to respond to allegedly illegal Chinese export subsidies. And new legislation is being drafted to penalize China for intellectual property violations.
China maintains it is being used in Washington as a scapegoat for the inevitable decline of U.S. manufacturing as jobs continue to slip to lower-cost countries. Nevertheless, anti-China sentiment has infected virtually every trade issue in Washington, leaving Bush with an uphill battle to secure passage even of the relatively minor CAFTA.
"CAFTA is more than a trade agreement," Bush pleaded yesterday in a speech in Washington. "It is a signal of our nation's commitment to democracy and prosperity for the entire Western Hemisphere."
Now, China has added national security concerns to economic anxieties, with lawmakers expressing fear that China is aggressively seeking to corner a strategic asset, oil, and create its own captive supply. House and Senate members demanded an administration review of the bid, required under the Defense Production Act, to determine potential economic and security risks. Treasury officials indicated they would agree to the request if Unocal accepts CNOOC's offer.
"If you don't review this one, that law is meaningless," Sen. Ron Wyden (D-Ore.) told Snow, adding, "I don't think being a free trader is synonymous with being a sucker and a patsy."