- The Washington Times - Thursday, September 24, 2009

OPINION/ANALYSIS:

It is supreme irony that the Chinese government characterizes any action by the U.S. government to preserve American jobs or to promote our economy as protectionism. But it is farcical that the Washington-based chattering class and its amen chorus are so ready and willing at the drop of a dime (or a renminbi) to endorse the Chinese government’s propaganda, in spite of the hard, cold facts.

The hue and cry about the Obama administration’s entirely justified decision to place moderate and temporary restrictions to counteract a surge of China tire exports is the most recent example of a long-running comedy of errors.

The Chinese government seems to believe, with some justification and with a pretty good track record of success, that anything the U.S. government does, or talks about doing, to support U.S. jobs can be headed off by raising the specter of protectionism. It is not surprising that Chinese government officials play this scare card - they are doing what they believe to be in their economy’s best interest.

What is consistently disappointing, though, is how many times the U.S. government has made its policy decisions in ways that are also in China’s best interests, often to the detriment of the U.S. economy. So, kudos to President Obama and to the Office of the U.S. Trade Representative for acting last Friday, in the face of enormous pressure, on the belief that American jobs matter.

While the U.S. has one of the most open markets in the world, the Chinese government is a protectionist machine. It runs a centralized economy with a goal of maximizing its exports and building giant global corporations closely controlled by Beijing. China’s economic road map, a series of “Five-Year Plans” (it is now implementing the 11th), identifies key industries important to China’s economy. Those industries, including automobiles, steel, information technology, aviation, and telecommunications, are nurtured, promoted and, yes, protected, through an assortment of subsidies, tax benefits, restrictions on foreign ownership, market barriers, and an artificially cheap currency.

When the U.S. Congress acted to place “buy America” provisions in the economic stimulus bill, Beijing was one of the most vociferous complainers. Yet, the Chinese government has far more extensive “buy Chinese” restrictions in its own stimulus package. It has consistently refused to join the World Trade Organization’s Government Procurement Agreement, unlike the United States which has agreed to live by the provisions. Beijing’s intent is purely protectionist.

When the Chinese government recently remarked that it may cut exports of several rare-earth minerals, that too smacked of protectionism. China controls the production of more than 90 percent of these minerals, much of it in China. Over the course of the past decade and a half, it has also acquired or tried to acquire the few sources of these critical materials outside China. Rare-earth minerals are necessary components in electrical engines for hybrid cars, plasma screens, hard drives in laptops, and other consumer products.

They are also critical to some defense technologies. If China cuts exports of rare-earth minerals, it will be protecting and promoting its own related industries, including green technologies, while shutting out companies in other countries. This action would be taken under the guise of conserving the materials for its own consumption. But, controlling the rare-earth material at the source and not selling it on the open market is, in practice, a form of protectionism. It promotes domestic industries and punishes foreign ones.

Over the next weeks and months, we will hear many more alarms raised by Beijing about the specter of protectionism. This tactic has proved an effective tool to advance its own interests. China’s ambassador to the United States, Zhou Wenzhong, recently was reported to have said that China wants the G-20, meeting Thursday in Pittsburgh, to make a strong commitment to avoiding protectionism.

By that, he means measures that would prevent highly subsidized Chinese goods from entering other countries’ markets. It is highly doubtful that he is signaling an intention by the Chinese government to end its own protectionist activities.

And, true to form, the “punditocracy” in Washington will join the chorus of clucking, criticizing some countries’ desires to support their own workers while praising China’s self-proclaimed commitments to open markets. Here’s hoping that the Obama administration will continue its admittedly short record of standing up against Chinese bluster and for American workers, companies, and industries. Contrary to the plaints of Beijing’s amen chorus, Washington must continue to confront China’s protectionism.

Carolyn Bartholomew is chairman of the U.S.-China Economic and Security Review Commission. The views expressed in this column are her own.

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