Congressman Bill Pascrell

Representing the 9th District of NEW JERSEY

The China Syndrome ; Leveling The Trade Playing Field

Aug 26, 2007

IN RECENT YEARS, American families have found their economic circumstances increasingly perilous. Many workers face wage stagnation or prolonged unemployment, and fewer people have guaranteed pensions, causing justified worries about retirement.

All of this uncertainty comes at a time when we face increasing costs for health care, education and energy. The American economy, on virtually all fronts, seems to be on shaky ground. And it is at precisely this moment Washington should focus on ideas and solutions to help our workers. Instead, many policymakers seem all too willing to turn a blind eye to a growing list of hazards we face.

One of the most pervasive issues we can no longer ignore is the comprehensive damage American businesses confront due to the structural disadvantages we have in competition with China. There are, of course, many reasons for the insecurity felt by hard- working people in the United States, but there is little doubt that our nation's trade policy is among the most prevalent. And while many of our trading partners intervene in markets to give their producers an unfair advantage over ours, China stands out as the worst offender.

The U.S trade deficit with China alone grew from $83.1 billion in 2001 to $232.5 billion last year. There are many reasons for this imbalance. One of the most important is this: China is stacking the deck.

China's unfair trade practice of purposely undervaluing its currency has had a profound effect, putting U.S. workers and manufacturers at a competitive disadvantage. While estimates vary, the Chinese currency the yuan is said to be undervalued by 40 percent relative to the U.S. dollar. This means a Chinese product will cost 40 percent less solely because of currency misalignment. This cuts into American markets and wipes American products off the shelves. As a result, we've lost good U.S. manufacturing jobs to China.

Avoiding issues

The Chinese government continues to protect the yuan from the free-floating market and is in violation of the currency- manipulation provisions of the World Trade Organization's General Agreement on Tariffs and Trade. Yet, inexplicably, the Bush administration refuses to engage China on this matter. If we're serious about improving the confidence of American workers, this is an issue we cannot afford to continue to ignore.

Likewise with the issue of subsidization. China's subsidy programs can take a variety of forms, including mechanisms such as credit allocations, low-interest loans and debt forgiveness to industries within its borders, ensuring that American exports don't have a fair chance at competition. Although China has admitted to more than 70 subsidy programs, it has made no commitment to withdraw them, and there is reason to believe that a great deal more exist.

Many people don't realize that China, like many other countries, actually offers tax rebates to exporters that ship items to the United States, while also levying additional taxes on U.S. imports. The United States employs no such tactic. An unfair playing field for sure.

Is it any wonder that the United States a country that possesses the most modern and efficient industrial base and the world's wealthiest single national market has hemorrhaged more than 3 million middle-class manufacturing jobs since 2001, 100,000 of them in New Jersey?

Some may argue that the job losses we face and the imports we do not sell are a small price to pay for giving U.S. consumers access to cheap goods. Although that argument was always specious in terms of basic economics, the recent proliferation of truly unsafe Chinese- made products on American shelves and in American homes should make even the most vociferous free-trade-at-all-costs proponent think twice.

Melamine-tainted pet food, toothpaste laced with antifreeze and a second batch of Mattel-branded toys containing lead paint were all made in China's low-cost manufacturing plants the very plants that I was prohibited from visiting during a 2003 congressional assignment to China. If a massive trade deficit created by China's cheating of the system and the resulting American job losses were not enough to propel action by the Bush administration, perhaps the thought of American lives at risk from unsafe imports will finally garner the response required.

Even if the Bush administration continues its ineffectual approach to China, Congress won't. Already, the House Ways and Means Committee has held hearings examining China's currency manipulation, subsidization process and safety concerns. Proposals to aggressively ensure that China is a fair, prudent and responsible player in the world community have been introduced.

No longer can we have a hands-off approach to China's trade policies while they throw punches at us. Time is of the essence. American jobs and, in some cases, lives depend on it.

Rep. Bill Pascrell Jr., D-Paterson, represents the 8th Congressional District.