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As Lew Visits Beijing, Let's Get Real With China

As Lew Visits Beijing, Let's Get Real With China

By Scott N. Paul - March 19, 2013

You only get one chance to make a first impression. So as newly minted Treasury Secretary Jack Lew visits Beijing this week, he should adopt a far more aggressive approach than his predecessor, Tim Geithner. It could change America’s relationship with China for the better.

For the past four years, China has walked all over us in the economic arena. The U.S. trade deficit with China last year was the largest between any two nations in the recorded history of the world, and it continues to rise thanks to Beijing’s profiteering approach to trade. On those occasions when we manage to chop down one trade barrier, China erects another. And when we begin to complain about China’s cyberhacking, Beijing plays the victim. We shouldn’t let it.

This administration seems to want to be friends with China at the expense of respect -- and of American jobs. China’s leaders act in the interest of their nation. They are classic realists, while our leaders hope that being “friends” will produce results. We’re still waiting.

It took White House Press Secretary Jay Carney an entire 24 hours after news that China’s military had hacked America’s businesses, electrical grid, and gas pipelines to use the words “China” and “cyberhacking” in the same press briefing. And despite clear evidence that China manipulates its currency to gain a trade advantage -- look no further than our trade deficit and China’s restrictions on purchasing its currency, the yuan -- the Treasury Department can’t even find enough strength to designate China as a currency manipulator.

We should, though, because calling out China for its cheating -- or even directly threatening to do so -- produces results. A Senate procedural vote in 2005 that marked the first step toward addressing Beijing’s currency manipulation provoked an immediate rise in the yuan.

When Geithner planned to get tough on currency ahead of a G-20 meeting in 2010, the yuan rose. It rose again during House and Senate votes on currency legislation in 2010 and 2011. And when President Obama and Mitt Romney promised to combat harmful Chinese trade practices during the 2012 campaign, the yuan budged yet another time. But when we take off the pressure, the yuan’s pace of appreciation decelerates dramatically.

Here’s an ironclad law of current economics: The yuan is pegged to American political pressure.

So imagine what would happen if Jack Lew told China’s politburo that the U.S. government has had enough of a trading partner who actively steals from American companies and devalues its currency to weaken America’s exports -- that we’re no longer willing to grant unfettered access to our market.

The yuan would rise.

We were told in 2000 that liberalized trade relations would result in a more democratic China and a new market for America’s manufacturers. Instead, it has produced: modestly lower prices at big box stores; an overseas migration of our manufacturing base and the middle-class jobs it supports; and a gaping trade deficit ($315 billion in 2012 alone) that Beijing uses to fund the world’s most sophisticated police state.

Jack Lew can read, and he undoubtedly follows the news. So he knows all of this too.

Here’s to hoping that our new Treasury secretary’s first trip overseas marks a different era in our relationship with China. In this chapter: Congress gives U.S. businesses new tools to counter currency manipulation in trade cases; the administration convenes negotiations with China and the European Union to stabilize currencies; and, Treasury designates Beijing a currency manipulator -- and limits China’s access to our government bond market until Beijing ceases this illegal practice.

This new chapter could begin with Lew’s visit.

The image of an administration official demonstrating some backbone on behalf of American industry could go a long way toward bolstering our country’s nascent manufacturing resurgence and aiding a sluggish economy. Or, instead we might see the same old measured responses and photo ops with Communist Party officials, which merely encourage China to continue bleeding us of jobs and treasure.

Ideally, we’ll have a Treasury secretary in Lew who knows that something must change in our trading relationship with China. America’s manufacturers and workers will be watching closely to see how he applies his knowledge this week. 

 

Scott Paul is president of the Alliance for American Manufacturing (AAM).

Scott N. Paul

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