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Time to stand up to China on trade

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By Harold Meyerson
Wednesday, September 15, 2010

This week, committees on both sides of Capitol Hill will plumb the conundrum of Chinese currency manipulation. The conundrum isn't that -- or why -- China is manipulating its currency: By undervaluing it, China is systematically able to underprice its exports, putting American (and other nations') manufacturing at a significant disadvantage. The conundrum is why the hell the United States isn't doing anything about it.

Treasury Secretary Timothy Geithner will march up to the Capitol to explain the administration's position, which, thanks to increasing pressure for action, may be growing tougher. There are certainly plenty of senators and congressmen -- and Main Street Americans -- who'd like to see the White House place some tariffs on the underpriced Chinese imports. If the administration doesn't act, Congress may just consider mandating some tariffs on its own.

Which is all well and good and long overdue, but Congress should really do more. As long as it's holding hearings, how about convening some to look at the pressure Wall Street puts on American companies to offshore manufacturing to China, where new factories are subsidized and workers are cheap? Or our inability to compete with the Chinese in such cutting-edge industries as alternative energy?

Congress could begin by delving into the 5,800-page complaint that the United Steelworkers filed last Thursday with U.S. trade officials documenting all manner of Chinese violations of World Trade Organization rules. As the global market for green technology has grown, the Chinese have responded with massive subsidies to their wind-turbine and solar-panel manufacturers.

The administration must rule shortly before the November elections on whether it will take the steelworkers' complaint to the WTO. On the merits of the case, and as a matter of practical politics, it shouldn't be that hard a call. There's little dispute that the Chinese government controls such strategic industries as alternative energy and that it subsidizes that industry massively, in clear violation of WTO rules. Politically, the American public plainly supports policies that boost American industry and curtail offshoring. A Heartland Monitor poll, sponsored by Allstate Insurance and the National Journal, released last week, asked Americans to choose one of three options for how America should deal with the global economy. Thirty-six percent backed a program that instituted tariffs on imports and penalized companies for offshoring jobs. Thirty-two percent supported governmental programs to help strategic domestic industries. Just 23 percent backed a laissez-faire free-trade policy.

But there's nothing laissez-faire about our Chinese competition, which raises a question for American conservatives: If they're opposed to state support for industries, shouldn't they back the steelworkers' complaint? They can't be credibly concerned with what they see as the growing role of government in the private-sector U.S. economy and remain unconcerned about the complete governmental control of our ostensibly private-sector competitors in China.

One group that, until recently, you'd expect to join the steelworkers' complaint is American manufacturers. But American big business is thoroughly cowed by China. Our major manufacturers and retailers now make, buy or sell so many of their products there that they dare not offend the Chinese government. That not only explains why the steelworkers filed the complaint by themselves, but also why the union has moved into a role more customarily filled by American entrepreneurs.

In August, the steelworkers announced a deal with the Shenyang Power Group that will result in Shenyang building a wind-turbine factory in the United States (probably in Nevada). The genesis of the deal was the revelation last year that in providing subsidies to a Texas wind farm (the kind of subsidies that don't violate WTO rules), the U.S. Department of Energy was providing funds for a project that would employ 30 American workers -- using wind turbines built in China by several thousand Chinese workers. The deal exposed the illogic of a national energy policy that ignores the question of where the technology is built. The administration responded by proposing an expansion of an already over-subscribed program of tax credits for domestic green manufacturers. (The expansion has been blocked, of course, by congressional Republicans.) And as the steelworkers continued to build support for restrictions on subsidized Chinese imports, the Chinese energy industry, in the words of the Heritage Foundation's Derek Scissors, "was willing to cut a deal to maintain its access to U.S. markets."

Consider what this says about contemporary American capitalism. American big business is now so inextricably invested in China that it won't defend or promote American-based manufacturing. Those tasks have fallen to our largest manufacturing union. By any dispassionate measure, it's our labor movement, not our leading businesses, that deserves the term "American."

meyersonh@washpost.com


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