If Donald Trump were to become president, he would not be able to start a trade war with China , said Gordon Chang, author of “The Coming Collapse of China.” That’s because the Chinese have already been targeting American businesses, he said Friday. Continue reading “Trump May Be Proven Right on China Tariffs”
Washington still doesn’t get it. We’ve known for years that China hacks government networks, industry computers, and advocacy groups like ours.
A study released last week by a Virginia-based cyber-security company confirms this: The Chinese military is responsible for a series of sophisticated computer hacking attacks on more than 140 American companies.
These hackers have stolen everything from product design blueprints to business strategies, and have also made a persistent effort to gain access to the controls of our infrastructure, including oil and gas pipelines and our electrical grid.
The Obama administration has known about China’s cyber hacking for some time. But the White House has sat on its hands because it believes calling Beijing out for cheating could undermine our overall relationship. In fact, the Administration still sometimes refrains from specifically identifying China as the hacking extraordinaire it’s proving itself to be.
News flash: When China uses its military to steal from American companies, it undermines our relationship. And when it starts groping for a hand on our power switch, we need to rethink what we’re getting in return.
Our official strategy — twisting like a pretzel to avoid offending the Chinese government (even when we catch them stealing from us) — is clearly not working. So why not try something else?
We run an enormous trade deficit with China every year, including a record $315 billion in 2012. China uses that money to spy on us. So here’s an idea: Why not use our trade relationship to force Beijing to play by the rules?
Contrary to what some Washington insiders suggest, getting tough on China’s cheating won’t start a trade war. Just like anyone else, China responds to pressure. In fact, when Washington has actually moved to address China’scurrency manipulation, Beijing has responded by budging the value of its currency incrementally (see the chart, above).
Yes, we have a large, complex relationship with China. But it’s really not rocket science: Calling out Beijing for flouting the rules gets results, a point I made this morning in an editorial for CNBC.
Together, we can keep it Made in America!
Alliance for American Manufacturing (AAM)
Many American economists and policymakers believe that currency manipulation by U.S. trading partners such as Japan and Singapore – and especially China – creates a drag on the U.S. economy and depresses the country’s manufacturing sector.
Currency manipulation involves artificially reducing the value of a country’s own currency, in effect providing a subsidy for national exports. Currency manipulators often buy U.S. treasury bonds to prevent their own currencies from strengthening. In the case of China, the country’s trade with the U.S. brings in an excess of U.S. dollars and would normally create a shortage of yuans. But to avoid the yuan’s appreciation and prop up its manufacturing sector, China buys up U.S. treasuries to keep the yuan out of currency exchange markets, thus maintaining an artificially low value.
About one out of every six U.S. private-sector jobs is in manufacturing, 17.2 million in total, according to the National Association of Manufacturers(NAM). However, manufacturing dominates when it comes to U.S. trade goods, accounting for 86 percent of exports in 2011, the U.S. International Trade Commission (USITC) says. So a U.S. trade deficit, exacerbated by currency manipulation, has a disproportionately negative effect on the manufacturing sector.
Robert E. Scott, Helen Jorgensen, and Doug Hall of the Economic Policy Institute (EPI) explain that reviving the crucial U.S. manufacturing sector “requires eliminating a jobs-destroying U.S. trade deficit in goods,” in large part by ending currency manipulation. Currency manipulation, the group says, “distorts international trade flows by artificially lowering the cost of U.S. imports and raising the cost of U.S. exports,” thereby displacing American manufacturing jobs.
Eliminating currency manipulation would reduce the U.S. trade goods deficit by at least $190 billion and as much as $400 billion over three years, allowing the U.S. to “reap enormous benefits” without any increase in federal spending or taxation. This would reduce U.S. unemployment by 1 to 2.1 percentage points and create between 2.2 million and 4.7 million jobs; between 620,000 and 1.3 million of those jobs would be in manufacturing. In addition, U.S. GDP would increase between 1.4 percent and 3.1 percent.
The Group of Seven (G7) top industrial nations is concerned that continued currency manipulation is creating dangerous instability in the global economy. The organization, which is comprised of the U.S., Canada, France, Germany, Italy, Japan, and the U.K., recently saidits members are committed to market-determined exchange rates and “will remain oriented towards meeting our respective domestic objectives using domestic instruments.”
The G7 affirmed that they “will not target exchange rates” – meaning they themselves refuse to be involved in currency manipulation. “We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability,” the group declared.
Artificially lowering a country’s exchange rate can make its exports cheaper and promote growth internally, but that only causes problems for other countries because one currency can fall only if another rises. This imbalance, the EPI warns, “could spark a ‘currency war’ – a destabilizing battle where countries compete against one another to get the lowest exchange rate.” This scenario “conjures up images of the 1930s, when countries pursued tit-for-tat devaluations in order to get an edge… the outcome was to decimate global trade, accentuate the depression, and sow the seeds for World War II,” according to the institute.
Scott Paul, president of the Alliance for American Manufacturing (AAM), argued that policymakers need to act now to prevent further harm from unfair trade practices.
“Congress is obsessed with the wrong deficit,” Paul said. “To grow jobs and boost the economy, we must eliminate the trade deficit. Ending currency manipulation will get us part of the way there, but we also need a smart manufacturing policy, one that focuses on innovation, public investment, skills, and trade enforcement.”
According to the EPI report, any U.S president could end currency manipulation with a stroke of the pen: “The president could simply declare that the United States will no longer sell Treasury bills and other government assets to China and other countries that refuse to allow the United States to purchase their government assets… Refusing to sell assets to currency manipulators would eliminate the principal tool used by foreign central banks to manipulate their currencies: purchases of Treasury bills and other government securities…”
Olli Rehn, top monetary affairs official for the European Commission (EC), told the Associated Press that joint governmental efforts are needed to fight the adverse effects of “excess volatility and disorderly movements” in exchange rates. “That’s why we need to lean on active international policy coordination in order to prevent a wave of competitive devaluations.”
WASHINGTON (Reuters) – A Chinese company’s attempt to take over government-backed battery maker A123 raises serious national security concerns, a bipartisan group of lawmakers said this week, adding to growing congressional opposition to the deal.
China’s Wanxiang Group Corp is currently competing with U.S.-based Johnson Controls Inc to buy bankrupt A123, which makes lithium ion batteries for electric cars.
The government must ensure that any sale of A123’s technology, which has also been used by the military and to support the U.S. electrical grid, does not threaten domestic security, the senators said in letter to Treasury Secretary Timothy Geithner, Energy Secretary Steven Chu and other top cabinet officials.
President Barack Obama launches a campaign swing through the pivotal battleground of Ohio on Monday — armed with a new trade enforcement case against China over allegedly improper subsidies to its auto and auto-parts sectors.
Mitt Romney has recently escalated his attacks on the incumbent as not doing enough to protect America’s battered manufacturing sector from unfair competition from Beijing. The message has special resonance in states like Ohio, where the auto-parts sector accounts for a sizeable chunk of the economy. (The White House says the industry directly employs 54,200 Ohioans and supports some 850,000 total jobs).
Obama decided to go after China at the World Trade Organization (WTO) because its subsidies are giving its auto parts a leg up — even in the U.S. market — over their American counterparts, the administration says.
The Obama Administration is also escalating another trade enforcement action, begun in July, against what it says are unfair anti-dumping and countervailing duties on some $3.3 billion in U.S. automobile exports to China.
The United States will ask the WTO to set up a dispute settlement panel to consider its case against those duties, which Beijing imposed in December 2011. China acted in response to the auto bailout Obama championed, arguing the rescue amounted to unfair government support for the industry.
“The key principle at stake is that China must play by the rules of the global trading system,” an administration official said on condition of anonymity. “When it does not, the Obama Administration will take action to ensure that American businesses and workers are competing on a level playing field.”
The Cleveland Plain-Dealer first reported the news.
In the eastern Chinese city of Wuxi, home to the world’s biggest maker of solar panels, labour is so cheap that workers carry out jobs by hand while machines designed to perform the same tasks sit idle.
The low cost of labour, coupled with the massive scale of production at its 14,000-person plant, have enabled China’sSuntech to become the global industry leader in just a decade.
Chinese producers now dominate the global solar power business. But their success has become a major global trade issue as American companies accuse them of dumping in the US market and receiving unfair subsidies from Beijing.
The US government is due to announce findings on the issue later this month, which could result in duties against Chinese manufacturers.
Suntech denies unfair business practices have helped make it the world’s largest producer, but it makes no secret of its strategy of keeping prices low to boost sales and make solar power available to more people.
“We don’t believe we have any unfair subsidies or anything like that,” said Suntech’s vice president for global marketing Edwin Huang. “We just hope it doesn’t turn into a full-scale trade war. It’s not good for anyone.”
US companies have accused China of improperly subsidising its solar sector as part of a no-holds-barred commercial battle for supremacy over an industry experts estimate will be worth trillions of dollars in the future.
They say Chinese competitors have access to cheap financing from state-owned banks and outright government subsidies aimed at building up the industry, as Beijing makes alternative energy a priority.
At least three US solar companies collapsed last year as global prices slumped, among them Solyndra, which had a $535 million loan guarantee from US President Barack Obama’s administration.
Evergreen Solar, once listed on the Nasdaq exchange, and high-profile Intel spin-off SpectraWatt also shut down.
By Howard Wial @CNNMoney February 23, 2012: 5:34 AM ET
Howard Wial is a fellow for the Brookings Institution Metropolitan Policy Program.
At first glance, manufacturing jobs would appear to be a dying breed.
The United States lost 6 million manufacturing jobs between early 2001 and late 2009. And despite small gains during the last two years, the trend in manufacturing employment for the last 30 years has been downward.
That has led some to argue that long-term job loss in the industry is inevitable. But our research shows otherwise.
There are two common versions of the “inevitability” argument. One holds that U.S. manufacturing wages are too high to be internationally competitive. The other maintains that manufacturing job losses are the result of productivity growth. Both arguments are wrong. Continue reading “How to Save U.S. Manufacturing Jobs”