America runs large and persistent trade deficits. Our partners figure out how to make lots of things we want, and we can’t figure out how to produce an equal amount of stuff they want or are permitted by their governments to buy.
So, it’s good news that at last American industry has something the Chinese want to buy. Well, not buy exactly. “Extract” or “appropriate” would be better words, with “steal” being a bit harsh. Their Russian counterparts also want a piece of this particular action. It seems that U.S. technology is something that neither of these trading partners can duplicate without the help of our government — which can issue export licenses for militarily sensitive items — or of our CEOs in Silicon Valley.
The American business community has long been in the forefront of the lobbying effort to prevent retaliation against China for its currency manipulation and its subtle and not-so-subtle barriers to imports. In return for access to China, big business was expected to plead the regime’s case whenever an issue arose that might put a strain on U.S.-Chinese relations. In a sense, big U.S. firms became lobbyists for the Chinese government, their fee being access to China’s markets and its low-paid work force.
After all, a huge market beckoned as China’s masses got richer. Take General Motors, the car company owned by the U.S. government and not exactly a roaring success in its home market. Sales to China’s cash-rich consumers increased by almost 50 percent in the first half of this year, compared with the same period in 2009, and now account for a quarter of the company’s global sales. Surely, that points the way for other companies.
Well, not exactly. It seems that China, its vaults overflowing with dollars, has no need for investment from the United States unless it brings something more than mere dollars. And with its membership in the World Trade Organization secured in 2001 by a spate of market liberalization policies, China has no further need to pander to the free-trade inclinations of the West with still more liberalization. Bare-knuckled protectionism is now the order of the day.
China’s $500 billion government procurement market has been all but closed to foreign suppliers, despite its promise to sign onto the WTO’s Government Procurement Agreement “as soon as possible” when it joined the WTO almost 10 years ago.
China now thinks another five years, and the opening of one-fifth of its procurement market might be reasonable. Meanwhile, government agencies and state-owned enterprises buy only products that incorporate indigenous Chinese technology.
But that’s the least of the problems America’s executives and former spokesmen for China’s interests face. It seems that they are not being allowed to build plants in China unless they turn over the associated technology. Worse still, the regime is subsidizing the construction of plants by domestic companies intent on capturing market share from the Americans.
General Electric, which once predicted that its sales in China would hit $10 billion this year, is having to settle for $6 billion, as heavily subsidized Chinese companies wrest not only domestic customers from it, but customers throughout Asia, especially in the manufacture and sale of wind power equipment — the stuff that President Barack Obama says is so crucial to the new age of American green manufacturing.
Irwin M. Stelzer is a contributing editor to The Weekly Standard, from which this article is excerpted.