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U.S.– China trade debate filled with questions
Frank Wolf
3/24/2004

Imagine a country where factory workers have no workplace safety, labor or environmental protections and are required to work 80-hour weeks for no more than $110 per month to produce goods for export.

Imagine a country which boldly supplies missile and chemical weapons technology to countries that support or harbor terrorists.

Imagine a country that oversees a network of espionage operations against American companies.

Imagine a country which is plundering a neighbor and wiping out its religion-based culture.

Imagine a country which tortures and imprisons Catholic bishops, Protestant church leaders, Muslim worshipers, Falun Gong followers, and Buddhist monks and nuns just because of their faith and systematically destroys churches and confiscates bibles.

Imagine a country which has a thriving business of harvesting and selling for transplant kidneys, corneas and other human organs from executed prisoners who are thrown in prison with no trial or sentencing procedures.

Imagine a country which maintains an extensive system of gulags – slave labor camps – as large as existed in the former Soviet Union that are used for brainwashing and “reeducation through labor.” Yet, none of this is imaginary.

Such a nation exists. It is the Peoples Republic of China and that country supplies half of all the merchandise imported into the United States, other than from Canada and Mexico.

In 2000 legislation was enacted to grant China permanent trade status with the United States at the time China became a member of the World Trade Organization. Subsequently, China joined the WTO in 2001 and now enjoys trade relations with the U.S. under the same system of low tariffs and easy access as other U.S. trading partners. In exchange, China agreed to abide by international trade rules and give U.S. exporters a fair and level playing field in China’s vast market.

Big Trade Deficits

Yet today, the United States buys more goods from China than it sells there – a gap of $124 billion in 2003, an all-time high. By country, the U.S. trade gap with China is the largest, twice that with Japan, the next largest, and it makes up almost one-fourth of the total U.S. trade deficit. Putting that into perspective, in 1989, at the time of the Tiananmen Square massacre in Beijing, the U.S. trade deficit with China was $6 billion.

That deficit is a major reason the U.S. is losing its manufacturing base.

Commerce Department data show that since December 1997, over 3 million U.S. manufacturing jobs have been eliminated as imports replace domestic production. As the fast-rising trade deficit with China documents, many of those jobs have gone to China as U.S. firms have moved their factories there.

Trade data produced by the U.S. government also make clear that beyond the unprecedented size of the U.S. trade deficit, these deficits are composed of goods America recently produced for itself with U.S. workers in U.S.-based factories – electric and electronic machinery; transportation equipment; instruments and related scientific goods; synthetic rubber and fibers and rubber products; pharmaceuticals and medicine; chemical products; aluminum; agricultural, construction, and metalworking machinery; engines and power equipment; computer, communication, audio and video equipment; semiconductors; medical instruments and supplies, motor vehicles and parts, and the list goes on.

‘Made in China’
The “Made in America” label is being replaced in large part by the “Made in China” label as the U.S. is becoming dependent on Chinese manufacturing for products vital both to the basic functioning of the U.S. economy and to U.S. national security.

Many experts suggest that U.S. strategic technologies are flowing into the Chinese military industrial base and strategic skills and know-how are being transferred to China along with U.S. factories.

Reports indicate that China has acquired the information necessary to replicate the United States’ most sophisticated strategic thermonuclear weapons and various associated launch and reentry vehicles. Last fall a facility in Indiana which produced 80 percent of the rare-earth magnets used in the guidance systems of so-called “smart bombs” – used so effectively in the Gulf War, Afghanistan and in Iraq – was closed and the production equipment was sold to China.

The sale of the sensitive bomb-making technology to China was approved by the U.S. government.

Today, of all nations, China is the largest recipient of direct foreign investment in new manufacturing plants and research and development facilities. Every indicator suggests that China will continue to receive far more foreign direct investment and foreign transfers of technology, particularly from the United States, in this decade than in the last.

Software Piracy

The Chinese market also continues to be dominated by piracy of copyrighted materials. In China, estimates are that 93 percent of the business software applications are pirated; 88 percent of the motion pictures and the music seen or heard in the country are stolen. Pirated copies of new software being released in America often ends up for sale on the streets of Beijing before we can buy the real thing in northern Virginia.

How can U.S. manufacturers, especially the small and medium-sized businesses, compete with Chinese-based factories operating with the most advanced technologies, the most modern equipment, and virtually free Chinese labor? Why would the United States give most-favored-nation trade status to a communist country which our own State Department’s annual country reports say is continuing to systematically violate the human rights of its own people? In addition, why would the United States continue to give preferential trade treatment to a country which our own Federal Bureau of Investigation has reported is spying on American companies and may pose a security threat to America? Those are fair questions and ones which have troubled me for many years. Last year the House Commerce- Justice-State (CJS) appropriations subcommittee, which I chair, held a hearing on the effects of Chinese exports on U.S. companies. In Virginia alone, nearly 49,000 manufacturing jobs have disappeared since the summer of 2000.

Apple Industry Hurt

Representatives from hard-hit furniture, pharmaceutical and agriculture industries all testified. A third-generation apple grower from Winchester described how the industry is being crippled by apple concentrate being produced in China and dumped in the United States. The Chinese government significantly subsidizes its apple industry, uses cheap labor and has virtually no environmental regulations.

A recent report produced for the National Association of Manufacturers asserts “that if our manufacturing base continues to shrink at its present rate, critical mass will be lost, the manufacturing innovation will shift to other global centers.

Once that happens, a decline in U.S. living standards in the future is virtually assured.” A national manufacturing expert testified that “if the 20-year trends of 20 percent import growth and 12 percent export growth were to continue for just five more years, the U.S. trade deficit with China would triple to over $330 billion.”

Taking Trade Seriously

As chairman of the CJS subcommittee, I worked through legislation enacted in January to revamp the federal agencies that oversee international trade policy. The law creates new senior level positions to oversee investigations of discriminatory trade barriers and provide more export promotion help for U.S. businesses to gain access to international markets. A new Office of China Compliance will specialize in antidumping cases regarding China to stop the importation and sale of foreign goods at prices well below domestic costs.

After hearing from northern Virginia information technology industry representatives and also learning that the cost of intellectual property theft to the U.S. is estimated at over $20 billion a year and that software piracy alone costs the state of Virginia 4,300 jobs a year and more than $295 million in lost wages and salaries, I directed that a new position at the Office of the USTR be dedicated solely to the enforcement of China’s intellectual property rights obligations.

Human Dimension

I believe there also is a human dimension to trade. As I work on this issue, I remember when I visited Beijing Prison #1 in China and saw imprisoned human rights advocates - including Tiananmen Square demonstrators – making socks for export to the West.

I also have seen with my own eyes in a visit to Tibet how the government of China continues to deprive the Tibetan people their freedom, their livelihood and their culture.

I also remember the plight of persecuted Catholic bishops and Protestant pastors and their followers in China who are imprisoned for their beliefs. I just met in February with a group of Chinese pastors, including Pastor Peter Xu. He told of being in prison five times for a total of 10 years because of his faith. He told of horrible conditions in the Zheng Zhou labor camp and how he was forced to make 7,000 Christmas lights each day for sale to the West – Christmas lights sold to Americans to celebrate the birth of Jesus made by a pastor in a slave labor camp.

Free trade must be our strategy and not just a goal. But if trading partners don’t play by the rules, then U.S. firms are at a disadvantage and American workers and families are hurt. The U.S. must enforce trade laws, particularly with China, to ensure American companies can compete on a fair and level playing field.

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