Bal Harbour, Fla.
In 2003, the United States ran a record-breaking $124 billion trade deficit with communist China, importing $152 billion worth of goods while exporting only $28 billion, a five-to-one ratio of imports to exports. The trade deficit with China is the largest the United States has ever had with any country in our history, and the most lopsided with any major trading partner. Proponents of China’s accession to the World Trade Organization (WTO) claimed that WTO membership would reduce the trade deficit, arguing that China would lower its trade barriers and bring its laws and regulations into compliance with international standards. In fact, the opposite occurred: since China joined the WTO in 2001, the U.S. deficit has grown by $20 billion in each of the last two years, about twice as fast as in the years preceding accession.
Nor has WTO accession altered the fundamental political situation in China—the Communist Party maintains authoritarian control over the economy and the government at all levels, denying Chinese citizens a political voice, religious freedom, and basic civil liberties.
The enormous and fast-growing trade deficit with China is simply one reflection of deep and unaddressed problems in the economic relationship between our countries. The two most pressing concerns are the Chinese government’s continued and brutal repression of fundamental workers’ rights and its manipulation of its currency. These two factors combine to put American workers and American-based producers at an impossible competitive disadvantage with respect to Chinese goods.
Yet the Bush Administration has failed to act. The Administration has not even enforced existing U.S. trade laws with respect to China, giving more weight to the concerns of the retailers, importers, and outsourcers, than to American workers and producers. The Administration has failed to file any complaints at the WTO, despite the Chinese government’s repeated and widespread violations of WTO rules. And last year, the Administration refused to criticize China's human rights and labor rights record before the United Nations Human Rights Commission, despite abundant evidence of egregious human rights violations. This inaction by the Bush Administration is costing hundreds of thousands of American jobs, crippling our manufacturing sector, distorting trade and investment patterns globally, and leaving hundreds of millions of Chinese workers vulnerable and mistreated.
It is no secret that one source of the Chinese government’s “comparative advantage” in global markets is brutal repression of the fundamental rights of its own workers. The State Department’s 2003 annual human rights report once again concluded that the Chinese government “continued to deny internationally recognized worker rights.” The New York Times, the Washington Post, academics, and human rights organizations have thoroughly documented state-sanctioned repression of independent unions, deplorable and often dangerous working conditions, and a system of migrant labor that artificially suppresses wages. The International Labor Organization (ILO) has repeatedly challenged the Chinese government on this pattern of suppression of workers’ rights.
American companies like Wal-Mart rack up billions of dollars in profits by taking advantage of the artificially low wages made possible by the Chinese government’s repression of democracy, political dissent, and fundamental human and workers’ rights. Last year, according to Forbes magazine, five of the ten richest people in the world were members of the Walton family.
The AFL-CIO will soon submit the first workers’ rights petition ever filed under Section 301 of U.S. trade law. The petition will argue that communist China's brutal suppression of workers’ rights displaces hundreds of thousands of good jobs in the United States, putting downward pressure on wages and benefits, and also diverts millions of manufacturing jobs from other countries. The petition argues that if workers’ rights were respected and better enforced, then workers—whether in China, India, Indonesia, Mexico or the United States—would improve their standard of living and generate new domestic demand in a virtuous cycle of equitable development, while providing new markets for overseas investors and workers. We will make every effort to pressure the Bush Administration to accept the case and to take appropriate and timely action.
The Chinese government has also violated international trade rules with respect to currency values by deliberately undervaluing its currency. The Chinese yuan has been pegged to the dollar at a fixed exchange rate since 1996. Underlying economic conditions have changed during that time, leading to a severe undervaluation of the exchange rate—we believe it is 40 percent, or even more. This rate can only be maintained through the Chinese government’s massive accumulation of U.S. dollar reserves, now over $400 billion.
The Chinese government’s policy of maintaining its currency at an unrealistically low value is in direct violation of WTO rules, which do not allow countries to boost their exports and restrain imports through exchange rate manipulation. The Industrial Union Council of the AFL-CIO has joined a coalition with a number of business organizations that is preparing to file another 301 petition, this one challenging China’s currency manipulation as an unfair trade practice. We believe that without such a direct challenge, it is unlikely that the Bush Administration will take timely or effective action to address this serious problem.
China’s flouting of internationally recognized workers’ rights and its currency manipulation are affecting not just American workers, but also driving the global race to the bottom, making it much harder for other developing countries to compete for market share without following suit. Economists predict that the elimination of global textile and apparel quotas next year will result in many developing countries losing significant market share to China. Some studies have predicted that developing countries could lose up to 20 percent of their export markets to China, and suffer a loss of $22 billion in export revenue (according to the U.S. International Trade Commission’s literature review).
The Chinese government’s reckless violation of international norms with respect to workers’ and human rights, currency, the environment, industrial subsidies, and other trade practices has gone unchallenged for far too long. U.S. policymakers, in the administration and in Congress, must use every tool available under U.S. and international trade laws, and create new, more effective, tools, where needed, to ensure that these unacceptable practices do not continue.