Level the Playing Field with China

Mar 2, 2012

President Barack Obama earlier this year laid out an economic blueprint that recognizes the vital need to develop a more assertive and comprehensive manufacturing strategy to level the playing field for U.S. workers. It could not have come at a more urgent time.

Unless we act quickly, we risk permanently falling behind China in manufacturing the products of the future.

Not long ago, the U.S. was a net exporter of advanced technology -- things like solar panels, optical fiber, semiconductors, electronics, telecommunications and medical equipment. That changed in 2002 with China's emergence, and advanced technology accounted for a third of our $295-billion trade deficit with China in 2011.

China's cheap labor isn't the major cause of the hole we've found ourselves in with advanced technology, which is capital intensive, not labor intensive. Nor are market forces the primary culprit. China's advantage is in large part due to an increasingly active management by the Chinese government. China gives its manufacturers whatever advantage it can over U.S. and other foreign competitors.

China provides massive loans at below-market interest rates, cheap or free land, extensive tax breaks and other subsidies in its effort to advantage domestic industry. It imposes restraints on the export of key raw material inputs. It requires U.S. companies in China to transfer their technologies to Chinese partners. And it engages in a large-scale manipulation of its currency in order to make its exports significantly cheaper.

The U.S. must start competing more effectively. The solution isn't for the government simply to get out of the way. The government's most recent five-year plan identifies, for the first time, "strategic emerging industries" for support and development -- industries that produce advanced technology products, including alternative-fuel cars, alternative energy and biotechnology.

We need to insist that China stop gaming the international economic system. Last month, for instance, China imposed new import duties on U.S. automobiles in what was widely viewed as a response to complaints filed by U.S. solar producers about unfair Chinese trade practices. The U.S. ambassador to the Word Trade Organization recently warned China to stop using "intimidation as a trade tool." We must publicly and forcefully continue to challenge this retaliation.

The president this week announced a promising new initiative to help level the playing field. He is creating an International Trade Enforcement Center to provide the tools and resources needed to ensure that China starts playing by the rules. Now Congress needs to grant the funding needed to implement that program. Without adequate funding, investigators have yet to quickly respond to a petition filed more than a year ago by workers in the clean energy sector, calling on the U.S. government to investigate more than 80 Chinese laws and practices that appear to violate China's WTO commitments.

Congress must strengthen support for advanced technology through the reauthorization of successful public-private partnerships that help pave the way for new innovations. In the last year, Congress has let expire two vital tax credits for advanced energy manufacturing. The lesson from the Solyndra bankruptcy cannot be that the government should stop providing loan guarantees for promising new technologies.

Our economic policy is at a crossroads. One path shrinks the government by cutting spending on everything from trade enforcement initiatives to clean energy production incentives. But China makes clear that that choice is a dead end for our manufacturers and workers.

The alternative is for our government to play a much more assertive role in leveling the playing field for our businesses and workers. That is one of the essential ingredients for the future of American manufacturing.