Obama-Hu Meeting Will Be a Missed Opportunity Unless Results in More Balanced Economic Relationship, Says Industry Group

Jan. 19, 2011
'The United States risks losing its place as the world's leading economy unless we take a firmer stance against China's mercantilist economic practices,' says The Alliance for American Manufacturing.

The Alliance for American Manufacturing (AAM) is urging President Obama to raise a number of key economic issues during Chinese President Hu Jintao's official state visit to Washington.

AAM Executive Director Scott Paul made the following comments regarding the visit of China's President:

"The United States risks losing its place as the world's leading economy unless we take a firmer stance against China's mercantilist economic practices. It is critically important for President Obama to tell President Hu that the time has come for a more balanced economic relationship. Currency manipulation, market-distorting subsidies, and harmful barriers to trade must be eliminated for the benefit of a global economic recovery.

"The President deserves credit for enforcing our trade laws when cheating exists. However, that commitment will mean little if further progress is not made during this official state visit.

"American manufacturing companies and their workers will be keenly watching and hoping for progress that will allow us to compete on a level playing field."

Specifically, AAM believes that the Obama-Hu meeting will be a missed opportunity if the following issues are not addressed in a candid and forthright manner:

  • Currency Manipulation
    The well-documented and deliberate currency manipulation policies of the Chinese government distort and undermine international trade, leading to massive global imbalances that prevent meaningful economic recovery. Ahead of last summer's G20 meeting, Beijing pledged to allow the yuan - undervalued by roughly 40% - to float more freely against the dollar. However, the yuan has only appreciated by a small margin since that time. The U.S. goods trade deficit with China has returned to the record level seen prior to the current global downturn. According to the Economic Policy Institute (EPI), 2.4 million American jobs have been lost or displaced since 2001 due to the U.S. trade deficit with China, which accounted for 83% of the U.S. non-oil goods trade deficit in 2009. According to Fred Bergsten of the Peterson Institute, ending China's currency manipulation could create at least 500,000 American jobs. According to EPI, more than one million jobs would be created and the anticipated growth could lower the federal budget deficit by as much as $500 billion over the next six years.
  • National Security
    While North Korea and Iran are key matters for U.S.-China cooperation, they should not supplant progress on curtailing China's predatory economic policies on the U.S. manufacturing sector, which voters ranked as the most important sector for national security. The decline of America's industrial base has resulted in a growing inability to meet critical military needs and to provide the necessary materials for national defense.
  • Energy and Environment
    The green technology sector has the potential to support millions of good jobs producing not only the wind turbines, solar panels, and other equipment needed to generate renewable energy and improve energy efficiency, but also the production of upstream inputs for these goods -- everything from steel and fiberglass to semiconductors and fuel cells. Unfortunately, America's ability to compete in this important area is being undermined by an array of protectionist and mercantilist policies deployed by the Chinese government that have fueled massive expansion in capacity, generated cut-throat pricing that harms U.S. producers and their workers, and has blocked U.S. exports to the Chinese market.

In addition, China further tilts the playing field by giving its producers privileged access to rare earth metals and other minerals that are essential inputs for many green technology applications. These policies have permitted China to become a world leader in solar production, a growing force in the wind equipment sector, and a top competitor in many other product areas. In the meantime, U.S. producers are struggling to keep up. The Obama Administration deserves credit for investigating these illegal practices and requesting formal consultations with the Chinese following the filing of a Section 301 petition by the United Steelworkers (USW). However, those efforts will prove meaningless without sustained pressure on the Chinese -- starting with the Obama-Hu visit.

The group points out a troubling trend in which the United States is losing its grip as the leading economy in the world:

  • In 2011, the U.S. is poised to lose its 110-year run as the world's leader in factory production to China.
  • The U.S. has lost its position as the world's leading high-technology exporter.
  • A recent survey found that 77% of global firms say they plan to build their new research and development facility in China or India.
  • China is poised to lead the world in patent application filings in 2011, surpassing both the U.S. and Japan.
  • In 2010, China passed the United States as the world leader in auto sales.
  • The U.S. has lost 2.4 million jobs since 2001 due to our massive and growing trade deficit with China.
  • China accounted for 83% of the U.S. non-oil goods trade deficit in 2009.
  • In 2010, manufacturing was viewed by American voters as the most important sector to the overall strength of the American economy and for our national security.
  • In 2010, 83% of American voters expressed support for tariffs on Chinese imports if they continue to cheat through their trade policies.

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