China and the US at Loggerheads

At the end of March, the U.S.-China Economic and Security Review Commission addressed Chinese attempts to be the foremost global economic power.
China and the US at Loggerheads
A pedestrian walks past an advertisment featuring U.S. dollar bills in Hong Kong on April 6, 2011. (Anthony Dickson/AFP/Getty Images)
4/7/2011
Updated:
10/1/2015

<a><img src="https://www.theepochtimes.com/assets/uploads/2015/09/111717858.jpg" alt="DOLLAR FIGHTING BACK: A pedestrian walks past an advertisment featuring U.S. dollar bills in Hong Kong on April 6, 2011. The dollar clawed back lost ground against the euro in Asian trade on April 5 following remarks by Fed chief Ben Bernanke that rising U.S. inflation would not persist.  (Anthony Dickson/AFP/Getty Images)" title="DOLLAR FIGHTING BACK: A pedestrian walks past an advertisment featuring U.S. dollar bills in Hong Kong on April 6, 2011. The dollar clawed back lost ground against the euro in Asian trade on April 5 following remarks by Fed chief Ben Bernanke that rising U.S. inflation would not persist.  (Anthony Dickson/AFP/Getty Images)" width="320" class="size-medium wp-image-1805891"/></a>
DOLLAR FIGHTING BACK: A pedestrian walks past an advertisment featuring U.S. dollar bills in Hong Kong on April 6, 2011. The dollar clawed back lost ground against the euro in Asian trade on April 5 following remarks by Fed chief Ben Bernanke that rising U.S. inflation would not persist.  (Anthony Dickson/AFP/Getty Images)
The West has been debating and has tried, mostly through closed door negotiations, to cajole China into joining the global economy as a true partner and becoming a valuable competitive force.

Instead, China only listens to its own devices and tries through threats, bullying, anti-competitive activities, subsidizing, espionage, illegal appropriation of intellectual property, and stealthily integrating itself into a country’s industries, to bankrupt its worldwide competition.

“Don’t underestimate China,” stated a January post on the RS Redstate website.

To bring the truth home through numbers, the writer continues, “They [China] have 1.6 billion people ready, willing and able to take on the US. And they put people into service at 5, 6, or 7 years of age. Five times as many workers as here. And with them being our largest creditor stakes are extremely high.”

The final words the writer imparts to the world, “My friends, the ‘enemy’ is NOT at the gate. It is already well past the gate, it’s over the threshold and inside the front door.”

Discussing China’s Attempt to Rule on a Global Scale

Once more, at the end of March, the U.S.-China Economic and Security Review Commission (USCC) addressed Chinese attempts to be the foremost global economic power. This time, the committee discussed China’s state-owned enterprises and how they fit into the equation in China’s quest to rule the world’s economies.

China’s state-owned enterprises, under the auspice and ownership of China’s central government, which is in turn controlled by the Chinese Communist Party (CCP), are formidable, larger than any other Chinese company, employ many Chinese people, and produce around 40 percent of Chinese products.

These companies “are an instrument of state power as well as the centerpiece of China’s industrial policy. They receive massive government subsidies and are protected from competition from foreign companies,” said Michael Wessel, commissioner at USCC.

Besides the giant enterprises, there are about 100,000 smaller companies owned by local and state government. They also benefit from their association with governmental entities by receiving subsidies, tax relief, protection from prosecution in the event of wrongdoing, and many other goodies.

“Their [small and medium-size firms’] persistence and their outsized influence in China certainly violate the spirit of the free market principles of the World Trade Organization [WTO],” said Wessel in his opening statement.

There are very few companies in China that aren’t owned directly or indirectly by government entities.

Several of those who testified before the USCC suggest that the United States must understand the intricate interrelationships between Chinese companies and Chinese government at all levels and act accordingly, especially when it comes to U.S. Defense Department procurements.

“The more that well-subsidized foreign entities are allowed to take advantage of our open market-oriented procurement policies, the greater the likelihood that our Defense Department will one day find that no domestic manufacturer exists for a critical piece of material. In other words, as our vital defense jobs and technology continue to be outsourced, our very national security is put at risk,” Rep. Rosa L. DeLauro, D-Conn., testified.

Next: WTO Caving In to Chinese Scheming

WTO Caving In to Chinese Scheming

On March 11, the Appellate Body (AB) of the WTO caved in to China’s machinations and handed down two rulings that limit the U.S. and Europe’s ability to counter unfair Chinese trade practices.

The U.S. government reacted in a release by the Office of the United States Trade Representative, in which Ron Kirk, U.S. Trade Representative, voiced displeasure by stating, “It appears to be a clear case of overreaching by the Appellate Body.”

Both rulings address anti-dumping and anti-subsidy duties for which every member assesses and implements a specific countermeasure and is not set by WTO members.

“The Appellate Body decision hinges on some very fine legal findings, which can be argued both ways, but one thing is for sure: this decision makes it more difficult for market economies (like the U.S. and the EU) to confront the trade distorting practices of state capitalism (like China),” according to a March article on the Foreign Policy Blogs Network.

The first ruling addressed the principle of public bodies, concerning state-owned enterprises. The second ruling tackled double-counting practices by addressing the anti-dumping and subsidies agreements at the same time.

The Chinese Law Prof Blog suggests in a recent article that when addressing the public body, the U.S. contends that any entity in which the government is the major stockholder is a public body and no further proof is needed. While the AB rejects this contention, it didn’t rule out that certain state-owned enterprises (SOEs) and SOCBs (banks that are owned more than 50 percent by the government) could be considered public bodies.

When it comes to anti-dumping and subsidies, the AB believes that applying both as a remedy is a violation of these two agreements.

The aforementioned Chinese Law Prof Blog disagrees on some fine points, “This is almost true, but not quite.”

Despite the AB ruling that considers assessing of anti-dumping and countervailing remedies to be a violation of the two agreements, the AB kept a back door open.

“The AB decision, it’s saying that double-counting (i.e., imposing antidumping and countervailing duties that amount to more than the total unfair price advantage that is to be offset) is a violation,” which in effect means that if the total duties offset the unfair price, it is not a violation, but it is a violation only if the amount is higher than the unfair price.

Congress Getting Into the Act

Congressional staff put the Department of Defense on notice that cutting costs when awarding contracts does not allow for accepting China’s undercutting competitor prices.

DeLauro introduced a bipartisan resolution with Rep. Frank Wolf, R-Va., on Feb. 18, which clearly states “that Congress will not fund this or any other defense system if the contract award involves any entity controlled, directed or influenced by the Chinese Government.”

Although the resolution also mentions that it will prohibit anyone but U.S. owned companies to bid on defense department contracts, it named China because this country undermines competitive forces and is openly in violation of global trade rules.

“At a time when the Chinese government is aggressively spying on the U. S., stealing valuable technology from our firms and strategically seeking to erode our manufacturing base, we must do everything we can to protect our national security interests from Chinese influence,” said Wolf in a DeLauro press release.