China is rapidly gaining as a economic and military power at the expense of the American standard of living and national security - thanks to "free trade" policies. William R. Hawkins, a senior fellow for national security studies at the U.S. Business and Industry Council provides analysis of Chinese strategies for global domination.
American Economic Alert
U.S. Corruption and Cowardice Feed the Rise of Superpower China
William R. Hawkins
Monday, July 02, 2007
In T’ai Kung’s ancient work of Chinese strategy, Six Secret Teachings, the king of Chou is given advice on how to defeat the stronger ruler of Shang, “Now on the Tao of planning, thoroughness and secrecy are treasured. You should become involved with him in numerous affairs and ply him with temptations of profit. Conflict will then surely arise.” The same tactic can be used to corrupt the king’s officials, “tempt them with what they find profitable, thereby making them disaffected.”
Modern diplomatic historians call this the “informal penetration” of a rival power. A more common term is “corruption.” To see how such a campaign to further Beijing’s strategic challenge to the United States is orchestrated today, one needs only to look at the U.S. Treasury and its supporters in certain segments of the transnational business community.
The Treasury again refused to formally cite the People’s Republic of China for currency manipulation in is semiannual report to Congress on June 13. It failed to do so for reasons that defy common sense and any realistic assessment of the competitive nature of world trade. The Chinese RMB is considered to be ast least 40 percent undervalued, making China’s exports less expensive and raising the cost of its imports.
It is a major contributing factor in expanding the lop-sided Chinese trade surplus with the United States, which reached $232.5 billion last year.The Treasury report acknowledges “heavy foreign exchange market intervention by China’s central bank to manage the currency tightly,” as well as the fact that China’s currency is “undervalued” in a system where the value is determined by the fiat of the government.
So why does Treasury not hold Beijing responsible for its actions? Treasury made a very subjective decision disguised as a technicality, proffering the astounding claim, “Treasury was unable to determine that China’s exchange rate policy was carried out for the purpose of preventing effective balance of payments adjustment or gaining unfair competitive advantage in international trade.”
China is not intent on using every tactic known to international commercial competition is to grab the largest share of world markets? What planet is Treasury living on? Such a lame excuse for ducking its responsibilities does not just lack credibility, it is completely beyond belief.
When the U.S. Trade Representative filed its case at the World Trade Organization against China for the use of illegal subsidies, the U.S. government had no doubt that Beijing’s intent was to gain advantages in both home and foreign markets. Why is it that Treasury, another cabinet department of the same government does not understand the nature of Beijing’s trade promotion strategy?
The answer is that Treasury Secretary Henry Paulson is unable to shake his private sector banker’s mindset that views China as a business partner. As CEO of Goldman Sachs, Paulson made a fortune helping Beijing rise in economic power, and he cannot bring himself to confront the monster he helped create. So his department conjures up whatever excuse it can find, no matter how transparently phony, to avoid a confrontation with Beijing.
Treasury’s report claims, “Treasury forcefully raises the Chinese exchange rate regime with Chinese authorities at every available opportunity and will continue to do so” and cites the Strategic Economic Dialogue held last month. But the SED produced nothing, because the Chinese delegation knew that Paulson had no intention of “forcefully” doing anything. At the end of the meeting, Vice Premier Wu Yi called the talks "a complete success" because Paulson, the Bush administration’s China czar, had avoided the "easy resort to threats and sanctions" that would have caused Beijing trouble.
The Treasury report was followed by the USTR’s rejection of a Section 301 petition from a bipartisan group of 42 members of Congress asking the Bush administration to file a complaint at the WTO against China if it doesn't raise the value of the RMB. USTR Susan Schwab’s statement cited the Treasury report’s failure to cite Beijing for currency manipulation, and then repeated USTR’s position that Treasury is the lead agency on this issue.
It is the failure of Treasury to take action, or to even call the situation what it is, that requires Congress to act. Two new pieces of legislation have been introduced in the Senate to address the currency issue. But they are weak, signaling that the Senate has no real stomach for a confrontation with Beijing.
Indeed, the bill introduced by Sen. Max Baucus (D-MT), with co-sponsors Chuck Grassley R-IA), Charles Schumer (D-NY) and Lindsey Graham (R-SC) is a major step backward from prior legislation offered by Sens. Schumer and Graham. The Baucus bill (S. 1607) does not take direct action against Beijing’s predatory tactics as did the previous Schumer-Graham bill, which would have imposed a 27.5 percent tariff on Chinese imports if the value of the RMB was not corrected.
The new bill gives Treasury 360 days (!) to continue its dialogue with Beijing, before calling for a case to be filed at the WTO. Going to the WTO would add a year or two before there would be any resolution, even if the United States won. American-based industry cannot stand two or three more years of unchecked Chinese commercial aggression in global markets. The Baucus bill cannot be taken seriously. On the day it was dropped, the most recent news story posted on the Senator’s official website was a photo of Jin Xu, Deputy Director General of China’s Ministry of Commerce. He was speaking at the Montana-China expo, held on May 23.
The other bill, offered by Senators Christopher Dodd (D-CT) and Richard Shelby (R-AL), the chair and ranking member of the Senate Banking Committee, is even weaker. It leaves a China-compromised Treasury in charge. The bill seeks to help Treasury cite China for currency manipulation by dropping the “intent” defense, and requires Treasury to go to the International Monetary Fund to complain about currency manipulation. It gives Treasury the authority to file a WTO case if “benchmarks” are not met in nine months.
But the flaw in this approach is not that Treasury officials are not smart enough to know what is going on, but that under Secretary Paulson, they are committed to a policy that benefits China and those corporations that have invested in Beijing’s rise.
Senate cowardice thus falls in the face of Treasury corruption. Beijing is not worried. Even as American officials and politicians were falling over themselves to avoid a confrontation with China, Beijing’s agents were busy shipping weapons to Iran to be sent on to help insurgents and terrorists in Iraq and Afghanistan kill U.S. soldiers.
Also on June 13, U.S. Air Force Lt. Gen. Robert Elder briefed reporters about Chinese “cyber-operations” aimed at high-tech industrial espionage and the penetration of government security agencies. Elder is to head a new cyber command being set up at Barksdale Air Force Base in Louisiana to counter this threat.
On the same day, Richard Lawless, the deputy undersecretary of defense for Asia-Pacific affairs, told the House Armed Services Committee that China was developing a “multi-dimensional counter space capability featuring direct ascent anti-satellite weapons, ground-based lasers, and satellite communications jammers.”
Studies by the Pentagon and the Rand Corporation have detailed how Beijing’s high-tech capabilities have benefitted from foreign investment supported by exports. Francois Jullien, a French scholar of Chinese philosophy, has argued, “Chinese strategy aims to use every possible means to influence the potential inherent in the forces at play to its own advantage, even before the actual engagement.”
Trade is thus not an alternative to conflict, it is part of Beijing’s constant struggle to “rise” and overthrow American preeminence. As Tai Kung advised, “Attack the strong through his strength.”
http://www.americaneconomicalert.org/
American Economic Alert
U.S. Corruption and Cowardice Feed the Rise of Superpower China
William R. Hawkins
Monday, July 02, 2007
In T’ai Kung’s ancient work of Chinese strategy, Six Secret Teachings, the king of Chou is given advice on how to defeat the stronger ruler of Shang, “Now on the Tao of planning, thoroughness and secrecy are treasured. You should become involved with him in numerous affairs and ply him with temptations of profit. Conflict will then surely arise.” The same tactic can be used to corrupt the king’s officials, “tempt them with what they find profitable, thereby making them disaffected.”
Modern diplomatic historians call this the “informal penetration” of a rival power. A more common term is “corruption.” To see how such a campaign to further Beijing’s strategic challenge to the United States is orchestrated today, one needs only to look at the U.S. Treasury and its supporters in certain segments of the transnational business community.
The Treasury again refused to formally cite the People’s Republic of China for currency manipulation in is semiannual report to Congress on June 13. It failed to do so for reasons that defy common sense and any realistic assessment of the competitive nature of world trade. The Chinese RMB is considered to be ast least 40 percent undervalued, making China’s exports less expensive and raising the cost of its imports.
It is a major contributing factor in expanding the lop-sided Chinese trade surplus with the United States, which reached $232.5 billion last year.The Treasury report acknowledges “heavy foreign exchange market intervention by China’s central bank to manage the currency tightly,” as well as the fact that China’s currency is “undervalued” in a system where the value is determined by the fiat of the government.
So why does Treasury not hold Beijing responsible for its actions? Treasury made a very subjective decision disguised as a technicality, proffering the astounding claim, “Treasury was unable to determine that China’s exchange rate policy was carried out for the purpose of preventing effective balance of payments adjustment or gaining unfair competitive advantage in international trade.”
China is not intent on using every tactic known to international commercial competition is to grab the largest share of world markets? What planet is Treasury living on? Such a lame excuse for ducking its responsibilities does not just lack credibility, it is completely beyond belief.
When the U.S. Trade Representative filed its case at the World Trade Organization against China for the use of illegal subsidies, the U.S. government had no doubt that Beijing’s intent was to gain advantages in both home and foreign markets. Why is it that Treasury, another cabinet department of the same government does not understand the nature of Beijing’s trade promotion strategy?
The answer is that Treasury Secretary Henry Paulson is unable to shake his private sector banker’s mindset that views China as a business partner. As CEO of Goldman Sachs, Paulson made a fortune helping Beijing rise in economic power, and he cannot bring himself to confront the monster he helped create. So his department conjures up whatever excuse it can find, no matter how transparently phony, to avoid a confrontation with Beijing.
Treasury’s report claims, “Treasury forcefully raises the Chinese exchange rate regime with Chinese authorities at every available opportunity and will continue to do so” and cites the Strategic Economic Dialogue held last month. But the SED produced nothing, because the Chinese delegation knew that Paulson had no intention of “forcefully” doing anything. At the end of the meeting, Vice Premier Wu Yi called the talks "a complete success" because Paulson, the Bush administration’s China czar, had avoided the "easy resort to threats and sanctions" that would have caused Beijing trouble.
The Treasury report was followed by the USTR’s rejection of a Section 301 petition from a bipartisan group of 42 members of Congress asking the Bush administration to file a complaint at the WTO against China if it doesn't raise the value of the RMB. USTR Susan Schwab’s statement cited the Treasury report’s failure to cite Beijing for currency manipulation, and then repeated USTR’s position that Treasury is the lead agency on this issue.
It is the failure of Treasury to take action, or to even call the situation what it is, that requires Congress to act. Two new pieces of legislation have been introduced in the Senate to address the currency issue. But they are weak, signaling that the Senate has no real stomach for a confrontation with Beijing.
Indeed, the bill introduced by Sen. Max Baucus (D-MT), with co-sponsors Chuck Grassley R-IA), Charles Schumer (D-NY) and Lindsey Graham (R-SC) is a major step backward from prior legislation offered by Sens. Schumer and Graham. The Baucus bill (S. 1607) does not take direct action against Beijing’s predatory tactics as did the previous Schumer-Graham bill, which would have imposed a 27.5 percent tariff on Chinese imports if the value of the RMB was not corrected.
The new bill gives Treasury 360 days (!) to continue its dialogue with Beijing, before calling for a case to be filed at the WTO. Going to the WTO would add a year or two before there would be any resolution, even if the United States won. American-based industry cannot stand two or three more years of unchecked Chinese commercial aggression in global markets. The Baucus bill cannot be taken seriously. On the day it was dropped, the most recent news story posted on the Senator’s official website was a photo of Jin Xu, Deputy Director General of China’s Ministry of Commerce. He was speaking at the Montana-China expo, held on May 23.
The other bill, offered by Senators Christopher Dodd (D-CT) and Richard Shelby (R-AL), the chair and ranking member of the Senate Banking Committee, is even weaker. It leaves a China-compromised Treasury in charge. The bill seeks to help Treasury cite China for currency manipulation by dropping the “intent” defense, and requires Treasury to go to the International Monetary Fund to complain about currency manipulation. It gives Treasury the authority to file a WTO case if “benchmarks” are not met in nine months.
But the flaw in this approach is not that Treasury officials are not smart enough to know what is going on, but that under Secretary Paulson, they are committed to a policy that benefits China and those corporations that have invested in Beijing’s rise.
Senate cowardice thus falls in the face of Treasury corruption. Beijing is not worried. Even as American officials and politicians were falling over themselves to avoid a confrontation with China, Beijing’s agents were busy shipping weapons to Iran to be sent on to help insurgents and terrorists in Iraq and Afghanistan kill U.S. soldiers.
Also on June 13, U.S. Air Force Lt. Gen. Robert Elder briefed reporters about Chinese “cyber-operations” aimed at high-tech industrial espionage and the penetration of government security agencies. Elder is to head a new cyber command being set up at Barksdale Air Force Base in Louisiana to counter this threat.
On the same day, Richard Lawless, the deputy undersecretary of defense for Asia-Pacific affairs, told the House Armed Services Committee that China was developing a “multi-dimensional counter space capability featuring direct ascent anti-satellite weapons, ground-based lasers, and satellite communications jammers.”
Studies by the Pentagon and the Rand Corporation have detailed how Beijing’s high-tech capabilities have benefitted from foreign investment supported by exports. Francois Jullien, a French scholar of Chinese philosophy, has argued, “Chinese strategy aims to use every possible means to influence the potential inherent in the forces at play to its own advantage, even before the actual engagement.”
Trade is thus not an alternative to conflict, it is part of Beijing’s constant struggle to “rise” and overthrow American preeminence. As Tai Kung advised, “Attack the strong through his strength.”
http://www.americaneconomicalert.org/
