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My Friend's Letter to the President Regarding China Trade

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A friend -- and expert on China and China trade -- whose current position prevents the author from going on the record asked me to help convey a letter to President Obama. As you will read, it is heartfelt and timely.

Dear Mr. President,

You can only imagine how energized expat Americans in Beijing were during the 2008 campaign. I was there. After eight dark years, we once again could hold our heads high. Young Americans held pizza fundraisers for your campaign, selling bilingual Obama t-shirts, and seasoned representatives of U.S. multinational corporations raised even more money at their lovely homes on the outskirts of Beijing.

I was so enthusiastic - and at once so concerned with another kind of change taking place in China - that last year I moved back to the States, after spending over 20 years in a rapidly rising Asia. It was like landing on Mars. Our infrastructure doesn't work, and, arriving from Beijing, our national airport looked like that of an un-developing country.

Mr. President, we need you to work with us to create a vision for the country and our future. We need you to galvanize the country, inspire us and get our people working again, as you promised and we heard.

Some things have changed since those heady days during the campaign. Even the "China hands" at U.S. multinationals have become concerned with China's growth and with our seeming lack of a viable response. This presents an opportunity for action that may only arise in a crisis such as what we now face. It is increasingly clear that the only goal of all those Chinese industrial plans we have been hearing about is exports by Chinese companies. China's infamous "Indigenous Innovation Production Accreditation Program", which was promulgated on November 15, 2009, limits all Chinese central and provincial government procurement to companies that have "indigenous" - or Chinese - "innovation". Even more insidious, embedded in it are (i) regulations to block non-Chinese firms from selling their products to Chinese government agencies and (ii) rules that force Western companies to give up technological secrets in exchange for access to China's markets. This combination makes meaningful sales of Western goods and technology to China almost impossible, while all the while we are watching China steal our most valuable intellectual property.

There is a common progression running through China's plans that guide the development of its industries, from autos to wind turbines:

• The West sends China money, technology and jobs;

• China then puts its masses of laborers to work;

• Chinese companies grow and expand into the China market, squeezing out foreign competitors through a complex web of incentives for purchasing products of Chinese state-owned companies, tax favors, subsidies, selective enforcement of intellectual property rights, and other hidden benefits;

• Chinese companies grow and expand into third country markets; and, finally,

• Chinese companies expand and grow - and become dominant - in the American market.

So where does this leave us, Mr. President?

Millions of American jobs and much of our technology have been shipped to China, including the technology that was supposed to fuel job growth in America during the 21st century. We have paid for this shift through our rapidly diminishing purchasing power and our diminished 401(k)s. The multinationals may do well over the next few quarters or even years, but those earnings may be short-lived, and in any event they are not being used to help out American workers. Friends and relatives I talk to in the U.S. are scared, scared for their homes, their jobs, and what the future holds for their kids. Workers at the plant where my brother is employed just had an across-the-board 21% pay cut.

I have two suggestions for what we can do. First and foremost, we need to understand our major competitor, China, for the sake of our markets, the livelihoods of our workers and our way of life. We need a full-court press to understand this all-of-industry trade behemoth whose framework has been constructed to take over our jobs and markets. Our industries need to understand what they're up against, and our policy makers need to get a grip on the fact that there is no single trade measure or WTO case that we can use to redress China's industrial policies.

A WTO case is a blunt edged tool in any event. By the time a case is decided, the jobs are long gone. Consider the auto parts case we brought against China. We lost much of that industry and thousands more jobs by the time China implemented the WTO dispute panel's decision, a full three and a half years from the date we filed the case, which followed a fruitless year of negotiations.

A serious bill on China's currency manipulation would help, but that would only be a first step. China's industrial policies are complex and the Chinese government is anything but transparent. The good news is that there are many Americans who understand China intimately, and we should take advantage of their knowledge and that "yes-we-can" American spirit I saw in Beijing in 2008. But Mr. President, we need you to lead this effort, and we need industry and both political parties to be part of it.

And what we don't need, with respect, is for your National Economic Council Director Larry Summers to return, as he just did, from high-level meetings with Chinese President Hu Jintao and Premier Wen Jiabao without even raising the issue of China's deplorable (and massive) currency manipulation, which rightly has Congress, the business community and labor all up in arms.

Second, we need an industrial and manufacturing plan for our own country, and well-structured strategies to help advance our growth sectors. This plan needs to address a number of questions. What is our vision for the future? What are our strengths? Where can we create the most jobs? What should our educational system look like to give people the skills needed in the jobs for tomorrow? What incentives and support does industry need to create jobs here in America? What disincentives would work to stop our companies shipping jobs overseas? What role can labor play in developing these strategies, and how can industry elicit labor's help, cooperation and creativity?

We as a country need to tackle these questions comprehensively and we need to get industry, workers and government involved in the process. Our industry, our people, and both political parties must come together against a common enemy: the ongoing un-development of America.

We do not need plans like those China uses. We all agree that it would be repugnant to our values and our way of life to have a centralized authoritarian state guiding our industrial development. However, we do need a vision and a plan for growth. We need what former Intel chief executive, Andy Grove, has called "job-centric economics."

In sum, Mr. President, we need aggressive leadership from you and change, and that change must involve a comprehensive plan for a future that quickly returns our nation to full, fair employment. Americans like to work and, by and large, neither industry nor government is taking up the challenge to put our people to work. We again want to make in abundance the high-quality, innovative products that once defined our economy.

Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.