China’s Double Standard on Free Trade
President Obama imposed a perfectly legal tariff on imported tires from China on September 12, 2009. This was symbolic of the president’s determination to adhere to his promise to strictly enforce trade laws and balance our huge trade deficit with China. His decision was meant to bolster the U.S. tire industry, from which 5,000 U.S. jobs were lost during a five-year period that coincided with a tripling of low-cost Chinese tires in the U.S. market.
Despite the legality and necessity of President Obama’s actions, China initiated plans to retaliate with duties on imported U.S. chicken and autos just one day after the President’s imposed tariff went into effect last year. Less than one year later, on September 1, 2010, China finally imposed their anti-subsidy duties on U.S. chicken for a period of five years. China’s Commerce ministry said producers benefited from government subsidies that lowered feed prices and hurt Chinese competitors.
If China wants to go tit-for-tat on policies that hurt domestic competitors, the U.S. should welcome this challenge. The United States currently buys $3.90 worth of Chinese goods for every $1 worth of American goods sold to China. This balance has been in China’s favor since they entered the WTO, and yet every time the U.S. tries to counter the backdoor protectionism of China, they immediately grumble and complain that we are destroying a mutually beneficial “free” trade relationship.
This catastrophic trend is not isolated to the chicken and tire industries. Our long-standing and enormous trade deficit has led to the loss of millions of American jobs, propelled by the need for companies to outsource their production or face elimination through competition from companies that did. This process has not been based on normal economic motivators like improved efficiencies. If it was, the trend would have been far less catastrophic and independent to those industries that were run inefficiently.
As it stands though, most producers and manufacturers have left American shores and flooded to low-cost China. Why? In large part, it is due to China’s currency manipulation. By keeping their currency low relative to the dollar, they maintain low prices and inexpensive labor. By undervaluing their currency, China has in effect created a backdoor import tax. When companies are forced to take advantage of this, China forces technology transfers and essentially makes the company’s future dependent on its presence in China. With production so far away from the consumer and owner, direct feedback and input is virtually unattainable and innovation becomes borderline impossible.
No company in their right mind would sacrifice long-term viability for short-term profits. Not only is outsourcing unethical (leaving the country that made you what you are and sacrificing the jobs of those who caused your growth), it’s bad business. When a company forcibly shifts its production to China, China makes huge demands of the company, taking away the company’s long-term sustainability and sovereignty. When the U.S. tries to resist or counter China in any way, they and “free” trade enthusiasts cry “foul!” and demand a reversal.
Our media likes to report on the disastrous effects of “protectionism” because their goals are directly aligned with China’s and the industrial elite. China uses tariffs to harm domestic chicken exporters so they will lobby to Congress to “fix” our protectionist policies. The media reports cherry-picked numbers and the false interpretation of data that say the tire tariff cost American jobs. The Bureau of Labor Statistics, however, found that employment in the tire-manufacturing sector has stabilized, and possibly increased, since the tariffs were imposed. This leads one to wonder what the agenda of the mass media really is.
This anti-American, pro-“free trade” sentiment is destroying America’s wealth and middle class. It seems everything we openly do to protect ourselves is automatically gunned down as dangerous “protectionism” that will destroy American jobs and ruin America’s future. Meanwhile, America’s wealth continues to shift to foreign entities and our ever-declining manufacturing industry continues to bleed America of jobs. All of this, perpetrated under the guise of “free trade.”