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Gilbert B. Kaplan Headshot

President Hu, Tear Down This Firewall

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There are moments when a President can make a difference, not solely by the strength of his policies or by the use of military power. But by an emotional and symbolic gesture that sends a message throughout the entire world community. Twenty-one years ago the United States faced down challenges to freedom and international prosperity at the Berlin Wall. Despite the admonitions of his advisors, President Reagan stood at the Brandenburg Gate and issued his famous challenge, "Mr. Gorbachev, tear down this wall!" Within two years the wall was gone and history was changed forever.

Something of that sort is needed in the trade world now, as we face challenges from China and elsewhere that have caused millions of U. S. jobs to move off shore. September is a time when President Obama can start this turn around. It will be a big month for the future of United States trade, and particularly trade with China. On September 17th the President will make his first decision regarding whether to off set surges of imports from China under a U. S. trade statute called Section 421. It is a statute that allows the United States, consistent with WTO rules, to impose duties or quotas to off set surges of low priced Chinese imports. In fact, China agreed that this statute could be employed against them until 2013 as part of their WTO accession. The statute has never been enforced before.

President Obama must decide whether to impose a trade remedy to off set what the United States International Trade Commission has already determined is a surge of underpriced passenger tires from China into the United States. Perhaps more importantly, a week later, the President will meet with President Hu Jintao of China as part of the G-20 meeting in Pittsburgh and will have the opportunity to use his moral suasion to deal with a host of trade issues.

Unfortunately, trade has not yet been featured prominently in President Obama's agenda. But the migration of the United States industrial base to South China is a major problem that needs to be addressed now. The U. S. trade deficit with China has been the largest with any single country for 86 months in a row. The deficit with China easily exceeds the U. S. trade deficit with Mexico, Japan, Germany, Canada, and Korea combined. For trade economists, trade deficits don't tell you everything. But they do tell you a lot. In this case, they tell us that more and more goods that we use every day are not made here anymore and are predominantly coming from China. And many of these imports are highly sophisticated manufactured goods, like computers and iPods and steel.

In September, President Obama should vigorously address four China trade issues. First, there needs to be a strong message sent to China to allow its currency, the yuan, to reach its real value, and not the artificially low value imposed by the Government of China to keep their goods cheap in the United States and our exports expensive in China. This was an issue raised by President Obama during his campaign, but since becoming President he has not touched this issue.

Secondly, he needs to take a hard stand on subsidies the Chinese government gives to its manufacturers to make them more competitive in international markets. At the G-20 meeting of world leaders last November, all parties agreed to avoid trade distortive and protectionist measures, but since that time China has added a host of export rebate subsidies to its menu of assistance to manufacturers.

Thirdly, he needs to look hard at the Section 421 case on tires from China. There have been major increases of these imports and they have come in at very low prices. Many United States tire plants have closed in the face of this surge of imports. It is difficult to imagine that he will not take strong action.

Finally, he should take up the cause of preventing internet censorship in China. One of the highest and best uses of American technology and intellectual capital are internet companies that push the boundaries of creativity, technology prowess, and speed of innovation. Is it any surprise that China is censoring these companies' access to their market? This issue has been a continual struggle for U. S. and other foreign internet companies for years, as China employs its great firewall, controlling all internet traffic in and out of China. The firewall utilizes a combination of sophisticated hardware and advanced software to prevent U. S. internet companies and websites from doing business in China. Every day there are reports of U. S. sites being blocked, whether it is Yahoo, or Google, or Wikipedia. The long term effect is that U. S. sites are simply not used in China, because they are too slow and unreliable. What is used? Chinese based web sites such as Baidu, China's leading search engine. There are instances of customers of YouTube and Yahoo in China, upon requesting these sites on their computers, receiving an error message and being redirected to Baidu. Recent reports indicate that the eBay site is slow and unworkable in China because of censorship, and that Chinese users are flocking to the Chinese competitor, Taobao. With China being the largest internet market in the world with 298 million users (compared to 251 million users in all of North America), this is not just a question of free speech, important as that is. It is also a question of trade and commerce.

The United States just this week won a WTO case on access for our published materials into China. We need to take steps for this newer technology now. It is particularly ironic that while computers, semiconductors, circuit boards and in fact, the whole infrastructure of the internet is now made in South China and exported to the United Stares, our internet service companies are often blocked from access to China.

It is time for President Obama to speak out dramatically on these trade issues, and send a message to China and to the displaced workers in America. Things are more complex now than they were in 1987 when President Reagan went to Berlin, and there is no single brick wall that interferes with freedom. But when President Obama meets with President Hu next month, he should emulate one of his predecessors, and in fact one he has spoken of admiringly before, and say something that could change history: "President Hu, tear down this firewall."