INSIGHT: US policymakers fire up opposition to China

06 October 2011 16:10  [Source: ICIS news]

By Joe Kamalick

WASHINGTON (ICIS)--US leaders are ramping up anti-China rhetoric, policy and legislation, with renewed charges that the Middle Kingdom is manipulating its currency, failing to follow global trade standards and engaging in “an intolerable level of economic espionage” against the US.

The sudden wave of anti-Beijing policy and legislative sabre-rattling may in part reflect growing unease among the US public about China’s impact on the US economy, export trade and domestic unemployment.

For the first time in recent polling data, a large majority of Americans see China as a long-term threat to the US.

This week the Rasmussen Reports polling company said that 62% of American adults regard China as a long-term threat to the US, a 12-point increase from the 50% survey result seen in February 2010.

The threat is seen primarily as economic, not military, according to Rasmussen.

“Seventy percent think China is a bigger threat economically than militarily,” the report said. “Only 15% see it more as a military threat, while another 15% are not sure.”

In addition, a growing number of Americans now see China as an outright “enemy”.

“Twenty-seven percent view the communist nation as an enemy, up from 16% in April and the most negative assessment in three years of surveying on this question,” said Rasmussen. “Only 9% of Americans now consider China a US ally.”

Increasing US popular suspicion of and even hostility towards China comes as Congress is considering legislation that would allow American companies to seek import duties on Chinese goods if Beijing is determined to be manipulating its currency to the detriment of US exporters.

Sponsored by Democrat Senator Sherrod Brown of Ohio, S-1619, the “Currency Exchange Oversight Reform Act”, would require the US Treasury Department to report annually on misaligned or undervalued currencies, and it would mandate retaliatory action by the White House against nations that fail to correct their monetary manipulations.

In addition to the annual review and report by Treasury, the bill would allow US companies to bring a formal complaint before the Department of Commerce (DOC) and the US International Trade Commission (ITC) to allege currency manipulation by a foreign country.

If the agencies’ investigation confirmed the company’s allegations, the Commerce Department could impose countervailing duties against selected imports from the offending nation.

Members of Congress and many among US industry have long complained that China has kept its currency, the yuan, artificially undervalued in order to make that country’s exports more competitive in the global marketplace.

An undervalued currency also benefits the manipulating country by making imports more expensive, consequently giving domestic producers another advantage over foreign competitors.

“How much longer is Congress willing to stand by and watch thousands of jobs move to China?”, Brown said.

“We know that two million jobs hang in the balance when it comes to currency manipulation,” he said, adding: “It’s time to put American jobs and American workers first."

Senator Lindsey Graham of South Carolina, one of the Republican cosponsors of the bill, said that the yuan is “blatantly manipulated” and that “China’s actions are deliberate and are designed to give China a competitive advantage in the marketplace”.

Another co-sponsor, Senator Charles Schumer (Democrat-New York), said that while the White House opposes the bill, “China’s history of half-truths and broken promises on currency makes passing this legislation an economic imperative”.

“There will be a bipartisan push to send this bill to the president’s desk this year,” Schumer added.

The White House also appears to be increasing its focus on Beijing’s trade policies and practices and whether China is living up to its open-trade obligations under the World Trade Organisation (WTO).

At a hearing this week at the office of the US Trade Representative (USTR), multiple business and government witnesses complained about what they said was China’s failure to comply with WTO requirements.

China was admitted to the WTO in late 2001 over the objections of many who argued that the huge emerging economy did not represent a fair and open capitalist society but indeed remained a totalitarian state with a centrally controlled commercial system.

At the USTR hearing, Claire Reade, assistant US trade representative for China affairs, noted that “significant questions had arisen regarding China’s actions” in the context of its WTO obligations.

“Issues of particular concern arose in a range of areas,” Reade said, “including intellectual property rights, industrial policies, trading rights and distribution services, agriculture, services and transparency.”

“Often, we traced these problems to China’s pursuit of industrial policies that rely on trade-distorting government intervention to promote or protect China’s domestic industries,” she said.

Citing the many complaints submitted to the USTR in the last year, Reade said that “This year’s written submissions underscore that concerns remain about China’s observance of WTO rules in a number of areas, including China’s implementation of specific commitments it made upon acceding to the WTO.”

While the USTR hearing was largely diplomatic and polite, those niceties were noticeably absent when House Intelligence Committee chairman Mike Rogers (Republican-Michigan) opened a hearing this week on cyber threats facing the US.

Rogers devoted much of his opening statement to the crisis-level of “pervasive Chinese economic cyber espionage” directed at the US and other Western developed nations.

While conceding that governments worldwide for centuries have been conducting espionage to gain an understanding of each other’s plans, intentions and capabilities, Rogers said China is different.

He accused Beijing of “brazen and wide-scale theft of intellectual property from foreign commercial competitors”.

“I don’t believe that there is a precedent in history for such a massive and sustained intelligence effort by a government to blatantly steal commercial data and intellectual property,” he said.

“China’s economic espionage has reached an intolerable level, and I believe that the United States and our allies in Europe and Asia have an obligation to confront Beijing,” he added.

Rogers’ spokeswoman said the congressman would not put forward specific legislation designed to confront China on its espionage but instead would marshal allies in Congress to press the White House to move against Beijing’s “intolerable” behaviour.

The hostile anti-China poll results, new anti-Beijing mood and legislation in Congress and the USTR’s new focus on Beijing’s trade practices come as the White House continues to struggle with a persistently high US unemployment rate of 9.1%, with some 14m Americans out of work.

If, as expected, the China currency retaliation bill or other anti-China legislation is approved by Congress, President Barack Obama will be hard-pressed to wield his veto – especially when Obama’s chances for re-election in November 2012 already look dim.

 ($1 = €0.75)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
Read John Richardson and Malini Hariharan's Asian Chemical Connections blog

By: Joe Kamalick
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