Saturday, May 19, 2007

Presidential Debate on China, as seen thus far

U.S. presidential candidates'
state of debate on China

The topic of China arose in Tuesday night's
Republican candidates' debate. We review.

By John Patrick Kusumi

China presents policy implications for politicians, and this year we are hearing increasing amounts of debate about China-related issues in U.S. mainstream discussions. During this early U.S. presidential campaign, we have heard interesting statements from Hillary Clinton on the Democrat side, and in Tuesday night's debate for Republican candidates, Duncan Hunter fielded two questions about China. It is apt that those questions were directed to Hunter, who is an anti-communist with a strong stance on U.S.-China relations.

Would I enjoy telling you "three cheers for Hillary Clinton," and/or "three cheers for Duncan Hunter"? Yes, if they deserved the enthusiasm. At this point, I will at best say "one and a half cheers" for both of them. Let's review the state of U.S. mainstream China debate.

I must measure the U.S. presidential candidate statements against "the gold standard" of China pronouncements: An earlier article from this quarter, titled 'A Clear Head In The China Debate' ( The key paragraph bears repeating:

The China Support Network and I have long advocated a prohibitive “tyranny tariff,” and I have stood my ground on saying that “free trade is for the free world.” Global free trade is flawed in two respects. It encourages trade deficits, and it is tantamount to a vast largess of “welfare for tyrants.” I believe that all free world nations should tariff all tyranny nations with which they run trade deficits- and conversely, they should not tariff if they are running a surplus with, e.g., China.

If Hillary Clinton or Duncan Hunter found their way to similar positioning, then it would indeed be time to say "three cheers" for them. Unfortunately, that's not what they recently said. In addition to a prohibitive tyranny tariff, my article noted that there are two compensatory tariffs that are justified based on China's currency manipulation and slave labor. Hillary Clinton and Duncan Hunter get one and a half cheers, because they appear to be in favor of a tariff to compensate for China's currency manipulation.

On March 1 2007, Clinton appeared on CNBC and spoke of "the sorts of changes, from intellectual property protection to currency evaluation that we need to do." In remarks aimed at China, she said that she wants "the countries with whom we do business to have protections for intellectual property; I want them to have a rule of law that is enforceable; I want them to not manipulate their currency." I have not seen her explicitly say tariff China, but the currency corrective tariff is sponsored by Chuck Schumer, the senior New York Senator and Clinton's opposite number in that state's delegation to the Senate. I am sure that she has heard about that tariff proposal; and, tariffs are inevitably a part of fixing trade deficits. Clinton has also said that she wants to fix those. If she follows through, then the word "tariff" is inevitably in her future.

On Tuesday, May 15, in the presidential debate, Rep. Duncan Hunter (R-CA) fielded two China related questions:

FOX NEWS: Congressman Hunter, virtually all U.S. exporters want access to China's huge market. You have said that you would deal with the enormous trade deficit this country has with that country. Tell me how you'd do it and how fast.

Duncan Hunter: Very simple. China is cheating on trade. They devalue their currency by 40%. That undercuts American markets [and] wipes American products off the shelf not only here, but around the world. And the latest study I've seen shows that we've lost 1.8 million jobs in the United States --high paying manufacturing jobs-- to China; 27,000 jobs lost in South Carolina alone. I would enforce the law with China --the trade rules with China. And the other thing I would do is, I would zero the manufacturing tax on American manufacturers. Our guys are down right now. They've been buffeted by these unfair trade practices. Let's bring back the American industrial base. And that's important for national security as well. That means we'll be able to have --you know, I sent out my teams, a couple of years ago when our [troops] were getting hurt by road side bombs. We found only one company left in America that could still make high grade armor steel plate. The arsenal of democracy is leaving these shores; we need to bring it back; I'll do that.

FOX NEWS: Congressman Hunter, many people feel the billions of dollars in American debt that China holds is a problem. If the Chinese decide to convert those dollars to euros, the value of the dollar drops. Do you see that as a security threat, and what would you do about it?

Duncan Hunter: If we don't do anything about it, it will be a security threat; and the other thing that will be a security threat is the fact that China is buying ships and planes and military equipment with hundreds of billions of American trade dollars coming their way. They've bought the Soveremenny class missile destroyers from the Russians, that were designed to do one thing: kill American aircraft carriers. So there is a security threat as we move --as we allow China to continue to cheat on trade. They are arming with American trade dollars. And they're lending our money back to us, and some people say, "Well, they'll treat us right if we get in a crunch." And I say "yeah, just like they treated that guy in front of the tank at Tiananmen Square." It's time for us to enforce trade rules with China: create a two way street, not a one way street, and that will give us much less exposure on the economic side that you're talking about, and the security side.

Duncan Hunter seems similar to Hillary Clinton in this one respect: The word "tariff" did not escape his lips in the remarks reported here. However, he is bound by the same laws of arithmetic that should bind Hillary Clinton, and indeed all presidential candidates. So again, tariffs are inevitably a part of fixing trade deficits. Hunter has said that he wants to fix those. If he follows through, then the word "tariff" is inevitably in his future.

I might have answered Hunter's second question differently. The worry is about the prospect of China selling off its dollar denominated holdings in the financial markets. American politicians should not feel "frightened into submission" to China on this account. In a free market, things sold are also bought at the other end of the transaction. In the "feared" eventuality, the U.S. debt instruments would change hands. Instead of feeling in debt to China, we would then be in debt to Japan and Europe -- our friends, rather than China. Would the shift depress the value of the dollar? In the short term, yes, somewhat. But the dollar has another reason for its decline in value -- the persistence (indeed the growth) of the U.S. trade deficit with China. In the midst of a shift (a rift?) in U.S. China relations, a falling trade deficit would relieve downward pressure on the dollar.

Let's imagine a spat with Communist China. The U.S. says to China, "Screw your exports. Stop sending us toxic food and defective products that need a recall anyway." This is a trade deficit reduction move and points the dollar upward. In reply, China says to the U.S., "Screw your debt instruments. We're selling them." This is a financial market event, and points the dollar downward. --Perhaps the reader can see my point, that this is like two chapters that cancel each other out. One adds lift to the dollar, and the other pressures it downwards. The two forces at least partially offset each other.

The value of the dollar is thereby balanced so that it is not the big worry in this scenario. More worrisome is the value of the bonds, yields, and interest rates. However, this concern would no longer have anything to do with China. As a financial market event, it can be left for Wall Street and the Fed to sort out. Big boys are supposed to be able to pull up their own socks, and tie their own shoes. Meanwhile on Main Street, trade deficit reduction actually eases inflation pressure, allows jobs to return, employment to rise, and wage growth to occur -- economics would remind us of the pre-Bill Clinton days, and Americans would no longer compete with Chinese slaves. Americans would have to value Americans more highly. A sense of community and nationhood could return as we emerge from recent dark years of profound betrayal by our own government.


The entire U.S. establishment -- officials, candidates, media, and Wall Street -- deserves correction from the China Support Network in the following way. They have complained bitterly and given great attention to the matter of China's currency manipulation, which indeed needs correction. When the value of the Yuan / Renminbi is held down, it is tantamount to an export subsidy. The overall logic says that China is practicing economic dirty pool and is tilting or rigging the playing field for its exporters. --By the same overall logic, the application of slave labor is economic dirty pool, and it tilts or rigs the playing field in favor of its exporters. Indeed, the United States removed the economic implications of slave labor in the 1800s by adopting the Emancipation Proclamation. After that, the U.S. had a domestic market that was free of the influence and implications of slavery -- until more recently. The embrace of Communist China as a trading partner abrogates the Emancipation Proclamation in its economic dimension and spirit. This matter is just as foul, economically, as currency manipulation.

--So, why the double standard? As we see above, two presidential candidates have currency manipulation as matters with top of mind awareness. China's practice of applying slave labor is another violation of free market economics, equally hurtful to America, and deserves equally as much to have top of mind billing.

In my view, the U.S. establishment reveals a dark heart on this issue. Currency manipulation is an economic issue. Slave labor is an economic issue, but it is also a human rights violation. Those who are mean-spirited in the U.S. establishment too often COVER UP human rights violations, perhaps thinking that "hey -- if it lowers costs, it adds to the bottom line, right?" There are K-Street lobbyists and news executives who will snarl derisively at any mention of labor issues or human rights issues. When there is deprivation and human suffering, it seems to be to the merriment of such K-Street lobbyists and news executives -- are they taking pleasure at the expense of others, while they write, promote, and pass trade deals that give short shrift to these issues? They perhaps assume that history is written by the winners -- hence, as long as their side wins, "Who cares about underlying truths, or outcomes on the ground?" That suggests a false sense of impunity. For them to continue to "look good" in light of their actions, it requires their assumption to be correct.

The U.S. establishment has a double standard. Currency manipulation is an economic issue, and it has become popular for politicos to decry. Slave labor is an economic issue, and it has languished in the basement where the establishment keeps the issues it won't address. (We should admit that the China Support Network writes from that basement, "under the rug" of the establishment. The basement is shared with the likes of Ralph Nader, consumer safety, America's spine with communism, national security, and of course those like us, who want "a level playing field" as a matter of practice, not platitude.) They are two economic issues, both pertinent to a level playing field; and, they have achieved different levels of popularity and response from the decision makers.

Hillary Clinton and Duncan Hunter, while they get credit for raising some China issues, cannot receive "three cheers" from the China Support Network until they raise and address the issue of slave labor as employed by Communist China. (There is another double standard of the establishment: The administration opposes trade with Communist Cuba, because it "helps the regime." If it is bad with Cuba, then why does the establishment pretend like it is good with Communist China? The China Support Network can see right through the kabuki dances that U.S. politicians employ with the China issue.)

As was noted in my earlier article, 'A Clear Head In The China Debate,' to correctly handle the currency issue requires a corrective tariff, and to correctly handle the slave labor issue requires another corrective tariff, which is additive or cumulative, over and above the first corrective tariff. Better still would be to throw the whole WTO out the window and begin anew with writing trade policy. Tariffs are a step in the right direction, to the best interests of America and its people. As a cheerleader for tariffs, I should pick up a bullhorn and say, "Give me a 'T'!...." :-)

Published May 19, 2007 by the China Support Network (CSN). Begun as the American response group in 1989, CSN represents Americans who are "on the side" of the students in Tiananmen Square -- standing for democratic reform, human rights, and freedom in China. For dissident news; to support a stronger China policy; or get more information, see

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