This week in Washington, the Secretaries of the Treasury, Agriculture, Commerce and Labor, as well as the U.S. Trade Representative and EPA Administrator, will sit across the table from their Chinese counterparts. For two days, these leaders will politely exchange views, smile for photos, shake hands and then adjourn the meeting. Promises of cooperation will be made. Both sides will talk about what a "win-win" our economic relationship is. That's the Strategic Economic Dialogue in a nutshell.
First you've heard of it? Not surprising. China and the United States have a large, unwieldy, and seemingly unmanageable economic relationship -- one that is difficult to summarize in 30 seconds or less, which may explain why it normally doesn't make the nightly news, or why none of the leading presidential candidates say much about China right now.
The choices about our economic relationship with China are often presented as absolutes: you are an enlightened "free trader" who wants to engage China and provide Americans with cheap products, or you are a jingoistic "protectionist" who seeks to shore up unproductive industries and simply bash away. These labels are neither helpful nor accurate. In fact, they needlessly cloud the debate on China. Our economic relationship with China is no longer a matter of grand philosophy; it is now based on cold, hard facts.
The largest single source of our trade woes is China. China's trade surplus was responsible for a staggering 42 percent of the United States' total, non-oil trade deficit last year. Our trade deficit with China skyrocketed for the sixth consecutive year in 2006, reaching a record high of $235 billion. (By contrast, the recent deal struck on the Panama and Peru free trade agreements will affect $10 billion in trade -- less than two weeks worth of U.S.-China trade.)
A new study by the Economic Policy Institute, "Costly Trade with China," concludes that the trade deficit with China has displaced 1.8 million American jobs since China joined the World Trade Organization in 2001. Every state and the District of Columbia lost jobs. Nearly three-quarters of those jobs were in manufacturing industries. Attention presidential candidates: New Hampshire lost a larger share of its employment -- more than 2 percent -- than any other state. California lost an estimated 269,300 jobs. The study is important because it is one of the few that looks at the entire trade picture.
When China became a member of the WTO, proponents argued that it would herald in a new age of opportunity and expand market opportunities for American companies. But American companies and workers have been adversely affected by a Chinese government policy that simply needs to be described for what it is: cheating. Subsidies, dumping, currency manipulation, violation of labor rights, and lax or nonexistent environmental enforcement are just some of the illegal practices that must be addressed.
After years of prevaricating, the Commerce Department has correctly allowed countervailing duty laws to be applied to non-market economies such as China, which may lead to some relief for American paper producers who have been devastated by illegal subsidies. The administration has initiated cases at the WTO on some Chinese subsidies and its theft of some intellectual property. These are important first steps, but the size and scope of the issues demonstrates the urgent need to do more than this.
Some critics argue, however, that enforcing our trade laws is shortsighted in this era of globalization and that the end results of these laws are limits on consumer choice and thus higher prices. When China's illegal practices are challenged, editorial pages sound alarm bells about escalation into a "trade war" whose victims will be American consumers.
The reality is that enforcing the law works. In fact, according to a study released this week by the Alliance for American Manufacturing, the economic gains of enforcing the rules outweighs by more than 50 times any so-called gains from allowing artificially low-priced products into our market. Imposing clear and direct penalties on China for illegal activities is vital to ensuring that we all have the same opportunity to benefit in the global economy. The rules of international trade are just that -- rules, not suggestions. Unless our leaders at the Strategic Economic Dialogue understand that, the meetings will accomplish nothing. Regrettably, the result is likely to be some vague agreement to try to make progress... and meet again.
Every nation in the world faces similar challenges from China. While nearly all of our industrialized competitors maintain an overall balanced current account, America struggles. That's because Germany, Japan, Korea, Brazil and other industrialized nations understand the importance of a strong manufacturing base and standing up for their workers. So should we, before it is too late.
The Alliance for American Manufacturing is a non-partisan, non-profit labor-management partnership forged to strengthen manufacturing in the U.S. AAM promotes creative policy solutions on priorities such as international trade, energy security, health care, retirement security, currency manipulation, and other issues of mutual concern. For more information: www.americanmanufacturing.org and www.manufacturethis.org.