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Michael Michaud

China's Actions Deserve U.S. Response
By Representative Mike Michaud
Apr 2, 2011 - 2:23:09 AM

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I was recently invited to testify before a hearing of the U.S.-China Economic and Security Review Commission. I was pleased to be able to offer testimony because I believe combating China's trade violations, especially their promotion of specific companies and sectors, is critical to our economic recovery as well as our national security. And we must respond to their unfair trade practices by focusing on our manufacturing sector at home and aggressively combating their trade fraud abroad.

I told the Commission that my thoughts on China's role in the global economy and the American economy have been shaped by the negative impacts China's unfair trade practices have had on Maine's communities. Our paper industry, for example, has felt the consequences of China's decisions to become a global leader in paper products. Domestic mills simply can't compete against companies that get interest free loans or enormous subsidies.

But it's important to note here, that the single biggest challenge from China facing American companies is the undervaluation of the yuan. Their currency manipulation puts Americans out of work and forces American businesses to close their doors. We must act with urgency to stop it. That's why I stressed to the Commission that we must enact a bill that my colleagues and I recently introduced to arm our country with tools to crack down on currency manipulation.

Maine's paper companies got some relief at the end of last year when the Department of Commerce began levying duties on certain Chinese and Indonesian paper imports. These tariffs helped Maine firms rebound, and some of them were able to hire back workers as a direct result. This response proved two important things: first, that American companies can compete successfully on a level playing field; and second, that we must use all of the tools at our disposal to try to bring China in line.

But this won't be easy. China's national policies often violate international trade law. For example, several years ago, China decided that it wanted to be the global leader in paper products and embarked on a strategy of illegal trading practices to achieve this goal. They were successful too. In 2008, China - despite having no lumber natural resources to speak of - became the world's largest producer of paper products. Such laser-focused and at-all-costs plans are typical of China's government. And this presents the main challenge Congress and communities all across America face: How do you respond to and engage economically with a country that so flagrantly violates international rules?

I think we have to develop and devote resources to two important strategies.

The first would be for our country to embrace a national manufacturing sector strategy. If China is going to implement nation-wide policies designed to boost specific sectors, we must fight fire with fire. Our strategy should not involve illegal subsidies, but it should involve clear objectives. We should ask ourselves the question: What should the American manufacturing sector look like? I believe a diverse, robust manufacturing sector is key to a strong American economy and critical to our national security. The strategy should also evaluate what policy changes are needed to promote more domestic production. Seeking input from companies that currently choose to make their products in the U.S. would help to develop these ideas. We should consider ways to incentivize U.S. production through our tax structure. And we should establish clear metrics of success.

Our manufacturing sector has declined over several decades, and it won't be rebuilt overnight. But if we are going to compete against China's state-owned enterprises, or the industries that receive preferential treatment by Beijing, we are going to have to have our own roadmap for the U.S. manufacturing industry.

The second strategy we must develop is a comprehensive trade enforcement strategy. The Obama Administration has already taken strides to enforce our trade laws and keep China in line. But they do not have enough resources, and the trade enforcement tools are not accessible to enough American companies. We must increase the resources available to investigate and analyze the trade violations that are brought forward by U.S. companies to the federal government for review. In addition, we must find a way to make these tools available to smaller companies who cannot hire law firms to put together a petition or cannot afford to collect all of the data necessary to make their case that China's unfair trade practices are putting them out of business.

These two strategies should be pursued as matters of economic development and national security. We cannot sit idly by while China out-produces and out-grows the U.S. economy. Instead, we must look at our own economic priorities and adjust them accordingly. I firmly believe that a strong, diverse manufacturing sector is key to maintaining our spot as the global economic leader. Congress and the Administration must devise a comprehensive strategy to rebuild our manufacturing sector.

Representative Mike Michaud

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