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China uses industrial policy is to keep out US products
Howard Richman, 5/11/2010

Alan Tonelsen of American Economic Alert pairs a revealing set of quotes in a May 10 blog posting (Obama Administration's China Trade Brain-Locke):

"We believe increasing our exports to China - not limiting our imports from China - is the best way to address the trade deficit.”–Secretary of Commerce Gary Locke, May 4, 2010

The United States is concerned "about China's increasing use of industrial policies that may restrict market access and discriminate against foreign goods and services”–Secretary of Commerce Gary Locke, May 4, 2010

The Washington Post had a good article about China's industrial policy on May 7 (China's industrial policy is bigger concern than yuan, U.S. executives say). Here's a selection:

An example? China used to import close to 100 percent of its wind-power turbines. Now it makes close to 75 percent of those that are sold in China. Chinese firms haven't developed wind-turbine technology; they've just required that foreign firms selling turbines in China share that technology, and now their firms manufacture the turbines at a lower cost.

"For years, the Chinese government promised there would be a gradual opening of the market to foreign companies," said Christian Murck, the leader of the Chamber delegation. "But now in a range of areas, there is increasing protectionism."

What Murck and his colleagues [at the American Chamber of Commerce in Beijing] want to see is a coordinated U.S. response to these pushes by China to halt Western products from entering China's market.

Despite the fact that the Chinese economy grew by 8.7% last year without increasing its imports one iota from us, the Obama administration thinks that just talk is a good way to increase American exports to China.

In truth, the best way to change China's policy of excluding American exports to China is to start tying Chinese exports to the United States to China's imports from the United States. The United States could use either Import Certificates or tariffs to do so.

Either action would be completely in accordance with a special WTO rule for trade deficit countries (Article 12 of the Uruguay agreement), as I pointed out in a recent commentary (How Import Certificates Could Balance Trade and Budget). which drew heavily from a December 2009 EPI working paper by international law experts from the Offices of Stewart and Stewart (Addressing Balance of Payments Difficulties Under World Trade Organization Rules).

When the Obama administration chooses not to invoke Article 12, even though President Nixon did so in 1971, they are choosing to give away America's future manufacturing and research and development jobs to China.

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