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Presidential Candidates Dodge Key Issue on China Trade

Low level of human rights helps multinational corporations make big profits

By Shizhong Chen Created: November 1, 2012 Last Updated: November 9, 2012
Related articles: Opinion » Thinking About China
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Students protest with model effigies of workers who have committed suicide at Foxconn in China during the company’s annual general meeting in Hong Kong on June 8, 2010. The difficult life at the electronics giant has caused despair in its workers. (Mike Clarke/AFP/Getty Images)

Students protest with model effigies of workers who have committed suicide at Foxconn in China during the company’s annual general meeting in Hong Kong on June 8, 2010. The difficult life at the electronics giant has caused despair in its workers. (Mike Clarke/AFP/Getty Images)

The last time China attracted as much attention in a U.S. presidential campaign as the current one was exactly 20 years ago, when Gov. Clinton criticized President Bush for kowtowing to China. President Clinton later kowtowed harder, but he at least tried to stand up to China during his first two years in the White House.

Both former Gov. Romney and President Obama have been talking tough on China, but by listening carefully, one can discern that they both dodged the key issue, hence there is no chance that they will stand up to China. Their answers to the penultimate question during their second debate serve as good illustrations.

The question, from hostess Candy Crowley, was how can American companies bring manufacturing jobs back to the United States when labor costs are so low in China.

The relevant part of Romney’s answer was to insist that China play fair in its currency valuation, which has been the main pillar of his China policy.

Let’s do a simple analysis, using the iPhone as an example. There are plenty of cost structure analyses available online. Their numbers vary to a small extent, but tell a similar story.

When a $650 (before contract discounts from the carrier) iPhone is made and sold, Apple recognizes about a $400 profit. Parts are about $200. Foxconn, the Taiwanese company manufacturing the iPhone makes maybe $20 off the assembly and another $30 in production engineering charges to Apple (something most analysts don’t account for). The poor Chinese laborers actually only make about $8.

Let’s say that on day one of his presidency, Romney labels China a currency manipulator and gets China to double its currency exchange rate, making the iPhone twice as expensive.

To make the iPhone as competitive as before, Apple would have to swallow a 40 percent price cut, but still has to pay the cost of iPhone production—alas, the Chinese labor cost goes up to $10. Will that make the iPhone manufacturing jobs come back to the United States? An educated guess is that Steve Jobs’s answer would remain the same, “Those jobs aren’t coming back.”

We may want to compel our president to take on China’s slavery head on.

Obama’s answer was equally, if not more out of touch with reality, “[T]here are some jobs that are not going to come back because they are low wage, low skill jobs.”

Making iPhones is a low wage, low skill job? So much for the soundness of the rest of Obama’s rhetoric, “That’s why we have to emphasize manufacturing. That’s why we have to invest in advanced manufacturing. That’s why we’ve got to make sure that we’ve got the best science and research in the world.”

The Real Problem

It would be an insult to the intelligence of both candidates and their teams to suggest that they do not know the real problem, for quite a few of China’s top scholars have openly attributed the low price of China’s products to the “advantages of low human rights.”

According to these scholars, the advantages include more than the Chinese government’s suppressed labor costs; they also include: unsafe working conditions, no or low benefits, no or low retirement security, no environmental protection, no personal life, and no thought for their well-being. For example, an increase in the number of suicides at Foxconn did not result in any changes other than placing netting below any building opening where workers could jump to their deaths.

It is important to note that for Chinese workers, Foxconn is as good as it gets. Foxconn’s factories are the very best that one will find in China, with lovely gyms, pools, and other amenities.

The problem is, nobody has any time to use them because the workers work 7 days a week, 16 hours a day. When 16- to 25-year-old people are put in a situation with no socialization and no dating and with no spiritual guidance, they will be depressed and kill themselves.

These scholars also pointed out that the “advantages of low human rights” are harmful to China as well as to its trade partners. It is not strange that their calls for policy changes have been ignored and that they themselves have been marginalized by the Chinese regime.

Neither the huge China market nor the promotion of human rights has ever materialized.

Why should candidates for the U.S. presidency also ignore these scholars’ findings and their explanation for the low price of China’s products? The answer is rather strange: they have almost no choice, as presidents before them have shown.

This started in 1989 when the Tiananmen Square massacre caused the Chinese communist regime to lose its legitimacy in China and to hunger for international recognition to help it survive.

The Chinese regime shelled out unprecedented economic concessions, and U.S. businesses found the perceived huge market of China to be irresistible. Multinational corporations formed a large lobbying campaign to push for and justify a China policy that could pacify Americans’ abhorrence of China’s human rights abuses. The ruse was called “promoting China’s human rights through economic development.”

Exploiting Slavery

Neither the huge China market nor the promotion of human rights has ever materialized. The multinationals, however, have made plenty of money by exporting their China-made products to the United States. How is that done? They exploit China’s cheap labor. Isn’t exploiting labor that cheap the same as slavery?

Is it insane to suggest that U.S. companies would engage in slavery? Slavery has been outlawed for one and a half centuries. The beauty is that it is not the U.S. companies that are running the slavery. Their hands are clean in that the Chinese regime has no qualms about abusing its citizens.

A symbiotic relationship thus formed. China’s slavery, or the “advantages of low human rights,” guarantees that U.S. companies derive handsome profits while, at the same time, protect their good names. U.S. companies ensure that China’s advantages of low human rights can continue and stay clear of being overly exposed or criticized.

The problem is that China’s low human rights advantage takes away American jobs and that threatens the electability of U.S. politicians.

Caught between powerful companies and angry voters, politicians have to find alternative strategies that will not touch China’s advantage of low human rights, but at the same time make voters believe that their policies will somehow work magic to get jobs back to America. Will that work?

The last time America had to deal with slavery, President Lincoln in his Second Inaugural Address looked to a higher reason to explain why the Civil War was the only way out, “The Almighty has His own purposes.”

A few lines later, Lincoln said, “Fondly do we hope, fervently do we pray, that this mighty scourge of war may speedily pass away. Yet, if God wills that it continue until all the wealth piled by the bondsman’s two hundred and fifty years of unrequited toil shall be sunk, and until every drop of blood drawn with the lash shall be paid by another drawn with the sword, as was said three thousand years ago, so still it must be said ‘the judgments of the Lord are true and righteous altogether.’”

If the profit extracted from America’s old slavery had to be wiped out through a Civil War, could the profit extracted from China’s modern slavery be allowed? Why is America’s economy in such bad shape? Can one of the candidate’s policies possibly pull Americans out of it?

“Fondly do we hope, fervently do we pray.” If Americans still believe in the Almighty the same as our ancestors did, we may want to compel our president to take on China’s slavery head on instead of beating around the bush.

Dr. Shizhong Chen is the president of the Conscience Foundation and a research fellow of ChinaScope.

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