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July 29, 2014

My followers are well acquainted with my opposition to the Trans-Pacific Pact (proposed trade treaty) with a number of countries (some slave wage venues, some not). One of the most noteworthy aspects of this proposed trade pact is that it does not include China. I have commented in the past that the proposed trade agreement is as much political as economic; that by proposing such a trade pact we are attempting to lessen the growing Chinese sphere of influence with its neighbors (and others).
As an emerging economy China is coming on to the world scene as a primary player and this represents a challenge to the fable that we are running the world’s trade show (not as producers but as consumers), hence the attempt to fence in the expansionist-minded Chinese. Such a pact is thought to be good from two points of view: (1) It fits our government’s geo-political fencing in of a competitor, and (2) It provides Wall Street with new sources of cheap labor so that their profit margins can be maintained. What does it do for you and me? It extends our economic malaise (unemployment and income inequality) while guaranteeing a bellicose China (which in turn guarantees increased defense appropriations – a double whammy – more money for neocon adventures from a smaller public wallet).
Another reason for the proposed agreement which excludes China (but not Japan) is that wages are going up in China, as well they should, considering where they started from. From a labor economics point of view, they should go up in all events so as to fairly compensate Chinese workers who with experience and training are more valuable and marginally productive employees and entitled to share in the wealth their efforts are helping create.
Negotiations for this treaty were begun under the Bush administration and continued under our current administration. A few months ago the current administration was ready to put the treaty up to the Senate for a vote, but many (including me) put up such a ruckus that Obama announced the vote was on hold. I presume it will be put up for a vote again when the heat is off, or if the Senate goes Republican this fall (or if we go to sleep at the switch again as we did when China was admitted to the WTO and given most favored nation trading status).
Our trade pacts (including the TPP) are, like our revenue and bankruptcy codes, written by lobbyists and lawyers for Wall Street and trade associations. They foresaw as far back as the Bush administration that Chinese wages were going up and that they needed alternative slave wage venues available to maintain their margins of profit. That day has either arrived or is near, so it’s time to look for new wage slaves.
The foregoing helps explain my opposition to the TPP but is only prelude. My purpose in writing this is to point up specific examples of Chinese cheating on trade rules. My followers have read my generalized complaints about Chinese trade cheating; this will point up a few such instances in detail.
First, I want to make it clear that I have no argument with Chinese labor; I hope their wages quintuple, not only because labor there is grossly underpaid (speaking of wage inequality), but because if they were paid fairly, it would level the playing field so that we could compete by bringing back some of the production that has been outsourced to their cheap labor venue (with a cozy arrangement where the wage differential between here and there currently goes into the coffers of the political class in Beijing and the trinity of the banking-corporate-investment class on Wall Street). Even if no production came back, good wages in China would stimulate domestic demand there for imported goods and services (assuming no tariffs on orders of Beijing), so that domestic production here for export could be stimulated.
I am a retired lawyer and a proud honorary member of the United Steelworkers Union, from whose quarterly magazine, USW @ WORK, I have pieced together research for this commentary. The USW and its American employers in steel mills and other unionized areas such as rubber and glass have been roughed up but good by Chinese trade chicanery, and to their credit, neither such companies nor our union are taking it sitting down.
I knew it was a bad mistake to allow Chinese membership in the WTO and even worse to give them most favored nation trade status with our country. They have violated the rules one after another but have not hesitated to employ the rules against us when favorable to their side of the trade game. (They are even, as I will detail in Part II of this essay, under indictment for breaking into the computer systems of five American companies and the USW. As U.S. Rep. Pete Visclosky (D-Ind.) said, “Foreign competitors are stopping at nothing to steal our information, flood our markets and take our jobs.”) He is right; this goes beyond dumping and free-ranging tit for tat tariffs; this is criminal.
Returning to wholesale breaching of trade rules, two are salient and interrelated: anti-dumping and subsidy for export. Any trading partner may subsidize domestic industry as much as it likes, but not for products made for export. Nor may a partner dump products on another partner at prices below fair value. China routinely does both. Section 421 of the trade act provides for countervailing tariffs in such a case. The USW was successful in having Section 421 applied by the International Trade Commission (ITC) to Chinese dumping of passenger and light truck tires in 2009, but the tariffs only applied for three years, and now that the Chinese have been freed from tariffs, they are back up to their old tricks again.
Chinese tires are flooding the American marketplace. Market share for American tire manufacturers has plummeted and layoffs of union workers for those companies have increased in proportion to the number of Chinese tire imports. The USW (with the support of its employers) has filed another petition with the ITC to apply the sanctions of Section 421.
I will write of the history of the first Section 421 finding and the one in progress on this auto and light truck tire trade issue in Part II along with another pending tariff for dumping of electrical steel by China and SIX other countries! These violations are putting thousands of Americans out of work and shuttering dozens of plants of American manufacturers with losses to shareholders and vendors of such bankrupt corporations as well. Why are we putting up with this?
Tariffs may not be enough; maybe it’s time to start shutting some of our partners out of our markets entirely. There is nothing we import that we could not manufacture here, and I fail to see why we should hold still for dumping and subsidies to Chinese export industries in crass violation of the rules agreed to. Now they are claimed to be involved in cybercrime in stealing our industrial secrets that have cost R & D millions to develop by American enterprise. If proven, someone tell me why such criminals deserve to continue to enjoy “most favored nation” trade status, or even access to our market. GERALD E


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