Issues
Holding China Accountable
The U.S. trade deficit with China skyrocketed for the sixth consecutive year in 2006, reaching a record high of $233 billion – nearly one quarter of the overall U.S. trade deficit. The sheer size and permanency of this deficit raises serious questions about its causes, including to what extent the deficit is driven by government interventions in the Chinese economy.
In particular, the People’s Republic of China (PRC) maintains numerous policies including state-sponsored subsidies aimed at promoting investment, exports, and employment. Those policies have a direct role in increasing the U.S.-China trade imbalance and negatively affect the health of our domestically based manufacturers, service providers, and farmers.
When China became a member of the World Trade Organization in 2001, proponents argued that it would herald a new age of opportunity and would expand market opportunities for U.S. companies. Unfortunately, China continues to follow a policy of export-led growth to build up its own manufacturing base at the expense of other countries. Almost 60 percent of China’s exports come not from Chinese firms, but from foreign-invested enterprises. Many of these companies set up operations hoping to serve the Chinese market, only to find a web of policies and practices to limit their opportunities there but incentives to export their products back to their home countries.
Just a few months ago, the director of the Chinese Government’s State-owned Assets Supervision and Administration Commission (SASAC), announced a new policy that raises serious questions about governmental control, involvement, and intervention in a number of major industries. In sectors ranging from telecommunications to steel to machinery and many others, China’s leaders made it clear that the state will continue to exert its control, making it virtually impossible for American firms to compete.
China has also provided massive subsidies to its companies to give them an advantage over U.S. farmers, workers, and businesses trying to sell their products to China, as well as flooding our market with their products. Company after company has been affected by a Chinese government policy that simply needs to be described for what it is: cheating.
China needs to be held accountable. It agreed to certain conditions when it joined the World Trade Organization but, time after time, it has refused to grant the kind of trade access to its markets that we provide to them. The result is one way free trade and, as noted above, skyrocketing trade deficits. Subsidies, dumping, currency manipulation, violation of labor rights, lax or nonexistent environmental enforcement– these are just some of the practices that must be addressed.
AAM will aggressively examine and expose China’s practices with the goal of ensuring fair and equitable treatment for their products and ours.
Reports
Costly Trade with China
A report issued by the Economic Policy Institute
Enforcing the Rules
Strong Trade Laws as the Foundation of a Sound American Trade Policy
Release: May 2007
