Why our trade relationship with China is in dire need of political - and public - attention

May 27, 2008
Lisa Towers questions who is to blame for the faults in our trade policy.

You’re likely to hear more than you ever wanted to know about China in the next couple of months during the run-up to the Beijing 2008 Olympic Games, which begin in August (http://en.beijing2008.cn/). Whether or not you’re a fan of the Olympics, the fact that the games are being held in China will be a great educational opportunity for Americans, who tend to know very little about this closed society. It can only benefit us to understand how one out of five people in the world live — as Chinese citizens.

The news about China that makes it into our media is often negative: contaminated Heparin, lethal dog food and tainted toys are hardly considered hallmarks of great public relations. And the Alliance for American Manufacturing (AAM) says you can add cheating to the short list of grievances against our nation’s third-largest trading partner.

In a conference call just before the Indiana presidential primary, the AAM presented a variety of ideas about China’s effect on American manufacturing, and the steel industry in particular. Scott Paul, AAM’s executive director and a Rensselaer, Ind., native, emphasizes that China is a big deal. AAM estimates that Indiana has lost 110,000 jobs in the past seven years, a heavy blow to a state whose economy is manufacturing-based and dependent on its voluminous steel production. Some of the state’s job losses derive from flawed trade policies, Paul says. Now, the AAM and Hoosier state steel workers want to know what the three presidential candidates are going to do to, if anything, to address this challenge.

Paul admits that China is difficult to explain in a 30-second sound bite, but that the trade relationship our country has with it is in dire need of political — and the public’s — attention. “When we grant access to our market, we want reciprocity,” he says. “Their country should play by the rules.”

Paul says the AAM and the manufacturers it represents are asking for a level playing field, in the form of the following actions:

  • Don’t manipulate currency
  • Don’t subsidize industries
  • Don’t dump products in U.S. markets
  • Honor labor and environmental laws
  • Operate production that is compliant.

Chinese President Hu Jintao isn’t likely to change much about the way his country’s industry operates anytime soon, so Paul says the burden of change is on us. “In their interest, we’re doing nothing to stop them, to tell them that their behavior is bad,” he explains. “We need to negotiate much more strongly and threaten sanctions unless you [China] do XYZ. It’s reasonable to expect that they would comply. There hasn’t been enough pressure on the [Chinese] government. We are in a real crisis here; we’re at a critical point.”

There’s an inherent danger in doing business with people or countries whose practices deviate far from your own. That’s the quandary democratic nations, including our own, are facing as they weigh whether to boycott the Beijing Olympics because of human rights abuses. Do you participate in the Olympics under onus in the hope of providing the Chinese with a glimpse of the outside world and the openness of democracy, or do you penalize their government’s bad behavior in Tibet by not showing up? It’s the classic Catch-22.

It’s not much different from what happened in 2000, when China was admitted to the World Trade Organization and trade barriers were dramatically reduced. We opened up our markets willingly to a Communist country in the hope that capitalism, in some form, would catch on with the Chinese. It has to a degree, but at what cost?

Terry Straub, senior vice president for government affairs and public policy for U.S. Steel, says the United States has a failed trade policy by almost any measure. “We [the steel industry] are a barometer of what will happen to other industries in the future,” he says. “There is rampant cheating going on in the system. We are playing by one set of rules, and China is playing by another set of rules, and that’s a zero-sum game. That is a trade policy that will not be able to sustain itself.”

E-mail Managing Editor Lisa Towers at [email protected].

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