Tag Archive | "China"

Wolf’s Clause Imperils (Some of) Administration’s China Plans

The following article by Matthew Robertson appeared in The Epoch Times online here.

WASHINGTON—Two Chinese journalists were supposed to watch the U.S. space shuttle Endeavour take off from the Kennedy Space Center in Florida in mid-May. The shuttle was using the Alpha Magnetic Spectrometer-2 particle detector, a component developed by Chinese scientist Samuel Ting, and their story would have made useful provender for China’s state media apparatus.

But they were turned away at the gates.

Their employer, Xinhua, the official mouthpiece of the Chinese Communist Party (CCP), went into high dudgeon. A scornful editorial made no bones about the man and the law responsible: “‘Wolf Clause’ betrays China-U.S. cooperation,” the headline read.

It was the doing of Rep. Frank Wolf, a long-term critic of the CCP, after he became chairman of the House Commerce, Justice, and Science Appropriations Subcommittee in January.

The language he inserted into the spending bill for those agencies in April prevents NASA and the White House’s Office of Science and Technology Policy (OSTP) from using federal funds.

The agencies are not allowed to “develop, design, plan, promulgate, implement, or execute a bilateral policy, program, order, or contract of any kind to participate, collaborate, or coordinate bilaterally in any way with China or any Chinese-owned company.”

Additionally, it prevents NASA from hosting “official Chinese visitors.”

“I think the Chinese are shocked,” said one of Wolf’s staffer’s in a telephone interview, responding to the Xinhua counterattack. “They’re so used to the administration caving to them and bending over backward. I think they’re truly taken aback that this policy was put in place.”

The clause is part of a larger debate about how the United States should deal with a Chinese communist regime that, while gathering ever more global clout, engages in state-sanctioned human rights abuses, technology theft, and persistent cyberwarfare against the U.S. government and American companies.

While none of that is new to Rep. Frank Wolf, the straw that broke the camel’s back was the suggestion by the Obama administration—first made when the president went to Beijing in November 2009, and reiterated when Chairman of the Communist Party Hu Jintao visited Washington in January—that the United States cooperate with China in human space flight.

The scope of the cooperation would have extended to “hands-on, bilateral, human space flight technology sharing, training sharing, and critical national secrets or expertise, giving that to the Chinese,” according to Wolf’s staff member, who was not authorized to speak publicly. “We look at this and say: ‘How does that administration not get this?’”

Wolf made his position clear in his testimony to the U.S.-China Commission in May: “The U.S. has no business cooperating with the PLA to help develop its space program.”

Cooperation with China on human space flight, would, according to Richard Fisher, an analyst and author on the Chinese military, “In essence … constitute a free transfer of technology.”

The People’s Liberation Army (PLA) leads China’s space efforts, and there is no real difference between China’s military and civil space programs, experts say. Wolf thus asserts, “There is no reason to believe that the PLA’s space program will be any more benign than the PLA’s recent military posture.”

His clause to combat this cooperative venture and others like it was passed as part of the budget negotiations, and is valid until Sept. 30. The item will have to stand on its own merits in new legislation to be introduced into the House.

Though the area of acute concern was human space flight cooperation, Wolf made the language cover OSTP as well “to send a signal to the White House and NASA” that “this is unacceptable,” according to Wolf’s staffer. “To engage China increasingly in bilateral areas is not appropriate until we see some changes in China,” the staffer added.

The administration and Congress have locked horns on the issue already, and they may do so again.

Chief of the OSTP, John Holdren, told Wolf’s subcommittee in early May that “the prohibition should not be read as prohibiting interactions that are part of the president’s constitutional authority to conduct negotiations,” effectively saying that the provision would not block cooperation.

Rep. John Culberson, who sits on the committee, consulted with Wolf about that. Then he fired back: “You need to remember that Congress enacts these laws and it’s the chief executive’s job to enforce them. … Now if anyone in your office, or at NASA, participates or collaborates or coordinates in any way with China, you’re in violation of the statute. And frankly, you’re endangering your funding and NASA’s funding.”

Holdren was unperturbed by the threats. The day after the hearing he participated in a major bilateral summit with senior Chinese officials over U.S.-China collaboration on science. “I take this blatant disregard for the law very seriously and the committee is currently reviewing its options,” Wolf told the U.S.-China Commission.

NASA declined an invitation to give testimony before the commission; Wolf expressed his “sincere disappointment” over that in his remarks.

Nevertheless, the space agency has taken a different tack to the ban than OSTP. They’re not fighting the provision, according to NASA spokesman Michael Braukus.

“It’s the law. We have to follow through with it,” he said in a telephone interview. He did not say what the feelings were within the organization about the cancellation and suspension of cooperation programs with China.

To stay as law into 2012, the clause will have to pass the Senate and White House. Both passed it as part of the budget negotiations in April, but it is not clear what they will do this time. The press office of the chairwoman of the Senate subcommittee did not return calls, and nor did the OSTP.

But if it passes the Senate, a White House veto of the bill would be risky. “It would certainly endanger funding for the administration. I think they would think very carefully before using a veto,” the Wolf staffer said.

They may instead continue to come up with creative, and possibly illegal, ways to skirt around it.

After Holdren’s performance in front of Wolf’s subcommittee, the latter asked the Government Accountability Office (GAO) to open an investigation into how the White House has allegedly been violating the law.

“Clearly they’ve shown a willingness to brazenly break the law this year,” the Wolf staffer said. “It’s pretty much an ironclad provision. It’s very clear to us, and GAO is interested in whether they’ve taken a far too broad interpretation.”

Such tug-of-wars have always taken place between the executive and Congress. “This is standard constitutional law competition,” says Henry Sokolski, executive director of the Nonproliferation Policy Education Center. “Who will bluff whom into what?”

But as news continues to splash across newspapers detailing ever more brazen cyber-attacks orchestrated by China, Wolf’s concerns start to look weightier.

“The brief against China misusing U.S. technology is not a null set: You give them a computer it turns into something they put in their weapons program,” Sokolski said. “Congress exercising its power of the purse over technology transfers to countries they see as despicable is legitimate. We used to have such a policy to Soviet Union; I don’t think it’s unprecedented.”

Cooperation with China’s space program is particularly risky, according to experts. “There is no ‘civilian’ Chinese space program—every facet is controlled by the PLA,” Richard Fisher, the Chinese military expert, wrote in an e-mail. “They are developing multiple space weapons … as such, any and all interactions between Chinese space people and those of any other country ultimately will redound to the benefit of the PLA.”

“We have a civil [space] program separate from our military program,” Wolf’s staffer said. “This administration has a hard time understanding that they’re not dealing with a Chinese civil program.”

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China’s Cyberassault on America

The following article by Richard Clarke appeared in the Wall Street Journal here.

In justifying U.S. involvement in Libya, the Obama administration cited the “responsibility to protect” citizens of other countries when their governments engage in widespread violence against them. But in the realm of cyberspace, the administration is ignoring its primary responsibility to protect its own citizens when they are targeted for harm by a foreign government.

Senior U.S. officials know well that the government of China is systematically attacking the computer networks of the U.S. government and American corporations. Beijing is successfully stealing research and development, software source code, manufacturing know-how and government plans. In a global competition among knowledge-based economies, Chinese cyberoperations are eroding America’s advantage.

The Chinese government indignantly denies these charges, claiming that the attackers are nongovernmental Chinese hackers, or other governments pretending to be China, or that the attacks are fictions generated by anti-Chinese elements in the United States. Experts in the U.S. and allied governments find these denials hard to believe.

Three years ago, the head of the British Security Service wrote to hundreds of corporate chief executive officers in the U.K. to advise them that their companies had in all probability been hacked by the government of China. Neither the FBI nor the Department of Homeland Security has issued such a notice to U.S. executives, but most corporate leaders already know it.

Some, like Google, have the courage to admit that they have been the victims of Chinese hacking. We now know that the “Aurora” attack (so named by the U.S. government because the English word appears in the attack software) against Google in 2009 also hit dozens of other information technology companies—allegedly including Adobe, Juniper and Cisco—seeking their source code. Aurora wasn’t an isolated event. This month Google renewed its charge against China, noting that the Gmail accounts of senior U.S. officials had been compromised from a server in China. The targeting of specific U.S. officials is not something that a mere hacker gang could do.

The Aurora attacks were followed by systematic penetrations of one industry after another. In the so-called Night Dragon series, attackers apparently in China went after major oil and gas companies, not only in the U.S. but throughout the world. The German government claims that the personal computer of Chancellor Angela Merkel was hacked by the Chinese government. Australia has also claimed that its prime minister was targeted by Chinese hackers.

Recently the computer-security company RSA (a division of EMC) was penetrated by an intrusion which appears to have stolen the secret sauce behind the company’s SecureID. That system is widely used to protect critical computer networks. And this month, the largest U.S. defense contractor, Lockheed, was subject to cyberespionage, apparently by someone using the stolen RSA data. Cyber criminals don’t hack defense contractors—they go after banks and credit cards. Despite Beijing’s public denials, this attack and many others have all the hallmarks of Chinese government operations.

In 2009, this newspaper reported that the control systems for the U.S. electric power grid had been hacked and secret openings created so that the attacker could get back in with ease. Far from denying the story, President Obama publicly stated that “cyber intruders have probed our electrical grid.”

There is no money to steal on the electrical grid, nor is there any intelligence value that would justify cyber espionage: The only point to penetrating the grid’s controls is to counter American military superiority by threatening to damage the underpinning of the U.S. economy. Chinese military strategists have written about how in this way a nation like China could gain an equal footing with the militarily superior United States.

What would we do if we discovered that Chinese explosives had been laid throughout our national electrical system? The public would demand a government response. If, however, the explosive is a digital bomb that could do even more damage, our response is apparently muted—especially from our government.

Congress hasn’t passed a single piece of significant cybersecurity legislation. When the Chinese deny senior U.S. officials’ claims (made in private) that Beijing is stealing terabytes of data in the U.S., Congress should not leave the American people in doubt. It should demand answers to basic questions:

What does the administration know about the role of the Chinese government in cyberattacks on public and private computer networks in the United States?

If there is widespread Chinese hacking of sensitive U.S. networks and critical infrastructure, what has the administration said about it to the Chinese government? Specifically, did President Obama raise concerns about these attacks with Chinese President Hu Jintao at the White House this spring?

Since defensive measures such as antivirus software and firewalls appear unable to stop the Chinese penetrations, does the administration have any plan to address these cyberattacks?

In private, U.S. officials admit that the government has no strategy to stop the Chinese cyberassault. Rather than defending American companies, the Pentagon seems focused on “active defense,” by which it means offense. That cyberoffense might be employed if China were ever to launch a massive cyberwar on the U.S. But in the daily guerrilla cyberwar with China, our government is engaged in defending only its own networks. It is failing in its responsibility to protect the rest of America from Chinese cyberattack.

Mr. Clarke was a national security official in the White House for three presidents. He is chairman of Good Harbor Consulting, a security risk management consultancy for governments and corporations.

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Trade rules must change

The following letter to the editor was published on the Herald Journal site here.

To the editor:

In a recent Reuters article, “Does corporate America kowtow to China?” (4/27/2011), a startling number was revealed: Since 2001, and concurrent with China’s entry into the World Trade Organization, 40 percent of U.S. manufacturing plants with 250 or more employees have been closed.

It’s a truly amazing number - a number that is made all the more extraordinary by the fact that very few in positions of leadership in America today seem to care about the fact that since 2001, 40 percent of U.S. manufacturing plants with 250 or more employees have been closed.

Since 1994 and the passage of NAFTA, and in conjunction with the remainder of our wildly moronic trade concessions - including our entry into the World Trade Organization and our granting Permanent Most Favored Nation Status to the People’s Republic of China - America has racked up $7 trillion in goods and services trade deficits. We’ve lost millions of jobs. We’ve closed more than 46,000 manufacturing facilities. And we’ve dealt a crushing blow to innovation and to our leadership in key industries.

Additionally, we are actually moving down in the sector of high-value-added industries. And most importantly, we have imperiled our national security, as communist China’s industrial capacity, research capabilities, technology transfers and outright thefts, and her spending efficiencies will soon leave us at a decided disadvantage.

America is being wonderfully played by ideologues who continue to embrace that which for us is proving to be a bankrupting philosophy - “Free Trade” as it is currently practiced and codified under U.S. law and international agreements. These agreements have always been written as to disadvantage American production and send it abroad. That we continue blind adherence to these one-sided treaties is imperiling our nation - as a nation that does not produce more than it consumes will eventually lose its economy and thus its power. To say otherwise is pure nonsense. Look around you.

At this point in our history, America needs to begin a serious debate as to the course of our future. Those leaders who continue to champion the decline of production in America and its concentration in the far East should be forced to show, empirically, how this has benefited the United States. If no true benefit can be shown - then we need to change the rules, take back our production and rebuild our capacity.

Doing so would bring about an expansion, the likes of which would be unprecedented in our history. To stay our current course will lead only to more contraction, more dissention and more hollowing out of our already weakened economy.

Arthur Taylor
Hyde Park

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Chinese riots enter third day

The following article by Tania Branigan can be found at The New York Times site here.

Rioters burned police and fire vehicles in a third day of unrest in southern China’s manufacturing heartlands, witnesses have reported.

Hong Kong broadcasters reported that armed police fired teargas as they sought to disperse the crowd and detained at least a dozen demonstrators.

The clashes, which began on Friday after a fracas between security officers and a pregnant street vendor in Xintang, Guangdong province, highlight Chinese authorities’ struggle to control social frustrations. It is thought that most protesters were migrant workers like the vendor.

Last week hundreds of migrant workers clashed with police in Chaozhou, also in Guangdong, following a dispute over unpaid wages. In Lichuan, Hubei, as many as 2,000 protesters attacked government headquarters last Thursday after a local politician who had complained about official corruption died in police custody.

Inner Mongolia recently saw its biggest street protests for 20 years, over the killing of a Mongolian herder who sought to halt coal trucks trespassing on grasslands.

Although the causes seem to have been very different in each case, the spate of incidents underlines the challenge that authorities face in preventing widespread grievances bursting out.

Unrest is thought to have become increasingly frequent, although data is hard to come by. The Chinese Academy of Social Sciences has estimated that there were more than 90,000 mass incidents in 2006, with further increases in the following two years.

China has increased its domestic security budget by 13.8% this year, to 624.4bn yuan (£59bn).

Police in Guangdong said on Sunday they had arrested 25 people after violence broke out on Friday night following a row between chengguan – low-level law enforcement officers – and a pregnant vendor during a crackdown on street stalls.

State news agency Xinhua said that Wang Lianmei fell during the dispute, while other accounts said that the chengguan had shoved her. The officers have a reputation for thuggish behaviour.

Other migrant workers from her province, Sichuan, quickly gathered, with some attacking police vehicles called to the scene with bottles, bricks and stones.

Another crowd gathered on Saturday as rumours spread that police had killed Wang’s husband, Tang Xuecai, and that she had been seriously injured. Local media said he appeared at a press conference on Sunday to say that his wife and their baby were fine and that he was happy with the government’s handling of the case.

“The case was just an ordinary clash between street vendors and local public security people but was used by a handful of people who wanted to cause trouble,” said Ye Niuping, the local mayor, urging residents not to spread “concocted rumours”.

The South China Morning Post said Xintang appeared to have calmed down on Sunday afternoon, with armed police and armoured vehicles patrolling the area, but that as many as 1,000 later gathered despite the heavy police presence.

“There were many people out on the streets late last night, shouting and trying to create chaos. Some of them even smashed police vehicles,” said a worker from the nearby Fengcai clothing factory, adding that bosses barred employees from leaving the plant.

An employee at a hotel in the area said police had told them to stay indoors.

State news agency Xinhua reported on Monday that officials had sent work groups to villages, factories and residential communities to set the record straight.

Guangdong police headquarters declined to comment and calls to the local police station rang unanswered.

“There is a lot of pent up anger and frustration among ordinary people – not just migrant workers,” said Geoff Crothall of Hong Kong’s China Labour Bulletin, noting the different causes behind the recent outbreaks of unrest.

But he added: “There are many towns in Guangdong which are still very much [divided between] locals and outsiders. Migrant workers are still doing the lowest paid, dirtiest jobs and suffer discrimination on a daily basis. That’s going to cause resentment and anger to build up.”

• This article was amended on 14 June 2011. A caption on the original referred to Guangzhou as a province. This has been corrected.


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China Takes a New Interest in Energy Efficiency

The following New York Times article written by Keith Bradsher can be found here.

SHANGHAI — The Chinese government is considering plans to subsidize the use of energy-efficient materials and renewable energy technologies in new buildings and is encouraging provincial and municipal governments to impose stricter efficiency standards than the national minimums, Chinese officials said Wednesday.

China’s heightened interest in saving energy — a response to electricity shortages and blackouts this year as well as longer-term security worries about dependence on energy imports — comes as the country’s construction industry continues to barrel ahead at a breathtaking pace. Last year, China consumed eight times as much cement as the world’s second-largest consumer, India, and it now leads the world in consumption of steel and other industrial materials by wide margins.

With 13 million to 21 million rural people in China migrating to cities each year — a number comparable to the 18.9 million people in metropolitan New York — the real estate industry has been putting up office towers and apartment buildings at a brisk pace but often with little regard for energy efficiency.

Chinese estimates show that the country’s commercial office buildings use 10 to 20 percent less electricity per square meter than comparable Western buildings. But the savings tend to come not from better designs but from thermostats set as high as 26 degrees Celsius (79 Fahrenheit) in summer and as low as 18 degrees (64 Fahrenheit) in winter.

Senior executives in the glass manufacturing and other material industries said that Chinese construction companies had long chosen low-cost, less insulated materials because buildings in China tended to change hands so frequently that owners seldom looked at long-term paybacks from electricity savings.

The construction boom is a central reason China passed the United States last year as the world’s largest consumer of electricity. China has also passed the United States as the world’s largest emitter of global warming gases, although it lags far behind in emissions and electricity consumption per person, because it has more than four times as many people as the United States.

Hao Bin, the building energy-efficiency director at the Chinese Ministry of Housing and Urban-Rural Development, said Wednesday that the ministry had already adopted an energy labeling system for new commercial and government buildings but wanted to create fiscal incentives for developers to use more efficient materials and adopt renewable energy. The most effective course seems to lie in subsidies for materials, as government studies have suggested that tax credits would be less effective, he said.

Some Chinese cities and provinces, from Beijing in the northeast to Yunnan in the southwest, already have limited subsidies for construction supplies, including insulation and rooftop solar water heaters. The heaters have water-filled steel tubes that zigzag in front of a reflective surface, which concentrates the sun’s rays on the tubes.

The Chinese central government has begun taking preliminary steps to subsidize the installation of rooftop photovoltaic solar panels, but the Finance Ministry has moved slowly because of concerns about the potential cost. China already manufactures more than half the world’s solar panels, but exports almost all of them.

Mr. Hao declined to provide a date for the introduction of a national incentive policy for energy-efficient construction materials and did not specify what materials would qualify. But he said that it was a focus of policy planners.

The question that policy makers are asking themselves, he said, is, “How can we have a carrot policy which is supplemented by our labeling system?”

Provincial governments have already begun subsidizing the construction of factories that produce energy-efficient products like triple-layer insulated glass.

Hongda Vacuum, a manufacturer of glass-coating equipment for solar panels and insulated windows, bought valuable land next to a large road six years ago on the outskirts of Changsha in Hunan Province for a third of the cost at the time for industrial land, said Huang Le, a marketing executive for the company. Surging land prices since then meant that the property soon became worth 10 times as much on the market as the price the company had paid for it, with a discount, in 2005, he said in an interview last year.

“We got the discount because we are a good project, something the government really wants to promote,” Mr. Huang said, adding that the company could borrow against the value of the land to finance expansion.

The central government has already renovated nearly 5,000 of its own buildings in northern China to install more insulation. It has subsidized similar renovations for buildings owned by provincial, municipal and village governments.

A complication for China is that the latest five-year plan, starting this year, calls for a sharp increase in the construction of low-income housing — traditionally an industry with low profit margins and a bias toward inexpensive materials — together with further curbs on the construction of high-end housing.

But Zhou Jiang, a policy researcher for the housing ministry, said Wednesday that energy-efficient materials added only 5 to 10 percent to the cost of a building.

“It is possible we build our low-income housing as green buildings,” Mr. Zhou said.

He and Mr. Hao were speaking at the opening of the Global Green Building China Focus 2011 conference in Shanghai.

One point that they did not address was how long it might take for energy-saving materials to pay for themselves in electricity savings. The Chinese government has been holding down electricity prices as an anti-inflation measure even as spot prices for coal, the country’s dominant fuel for power generation, have doubled in the last five years.

Chinese electricity companies have responded by limiting the operating hours of coal-fired plants in the last two years and slowing construction of new power plants, causing blackouts that have focused more public attention on the energy efficiency of buildings.

Residential electricity rates in China are half to two-thirds of rates in the United States. Industrial electricity rates in China are officially higher than those in the United States, but large or politically connected users frequently receive discounts.

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First Step in China Trade Policy—Stop Currency Manipulation

The following article by Mike Hall appeared on the “afl-cio now” blog here.

The U.S. government, American businesses and consumers all can play a role in combating China’s unfair trade policies that are weakening the nation’s economy, stealing jobs and giving China unparalleled economic advantages.

But the first steps must be taken by the government to declare China a currency manipulator—either through legislation or executive action—and then follow through with sanctions if China fails to respond, said a panel of trade and economic experts this morning at a special China trade policy forum in Washington, D.C.

The forum, sponsored by the Coalition for a Prosperous America (CPA), used the recent book Death by China: Confronting the Dragon—A Global Call to Action as the jumping off point for the discussion.

Authors Peter Navarro, professor of economics and public policy at the University of California-Irvine, and Greg Autry, an entrepreneur and educator, explore China’s trade policies, near nonexistent workers’ rights laws, environmental standards, product safety rules and its military and espionage actions. Death by China shows how those policies threaten the U.S. economy and jobs.

Immediate action must be taken on currency manipulation, said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities (CBPP) and former chief economist to Vice President Joe Biden.

Part one is currency manipulation. While it’s not the whole story it’s a big part of it….I could show you a graph that is a textbook example of currency manipulation and it would look exactly like China’s currency manipulation today.

The Chinese government keeps its currency low, which artificially reduces the prices of its exports, creates a huge trade deficit for the United States and costs millions of American jobs. Last year, the U.S. House passed legislation (388-79) that would give the government broader powers to enforce currency manipulation rules and impose sanctions. But the Senate has failed to act because of pressure from multinational corporations, said some panelists.

The Obama administration could act on its own and declare China a currency manipulator. “We need our own government to do its job,” said AFL-CIO Deputy Chief of Staff Thea Lee. Whatever action is taken, she said, “must include a credible threat of sanctions.”

Lee also noted that while most U.S. companies that do business in China have “corporate codes of conduct,” workers there suffer serious abuses, work in dangerous conditions for low wages and have no rights to join real unions. Not only do China’s practices lower even further production costs but they violate most so-called codes of conduct because in a “wink-wink” arrangement, China factory owners:

hire monitors to inspect their faculties to see if corporate code of conduct is being followed. They call up and say “We’ll be here next month, make sure everything’s cleaned up, that you’re not dumping poison in the river. We’ll see you the morning of March 22.” The market economy cannot function unless we have business rules of conduct.

Rob Dumont, a CPA director and president of the Tooling, Manufacturing and Technologies Association, said that while on paper products from China must meet U.S. safety, environmental and other standards, they often don’t, giving firms in China another big economic advantage.

He used the experience of an Alabama steelmaker as an example. The manufacturer was losing orders to much cheaper steel from China that was certified as meeting U.S. standards. But they sent a fact-finding team to China and discovered that not only did the plant have no environmental controls,

the lab that was supposed to certify the steel grade didn’t even have the equipment to properly conduct the tests. Back in the U.S., we sent a sample to a U.S. lab that confirmed the suspicion that the steel was inferior in quality and strength. This steel goes into critical applications like nuclear plants, and bridges and buildings. This happens day in and day out and one day we’ll pay the price with a catastrophic failure.

Along with enforcing current trade laws and developing new trade standards, Novarro and Autry offer several ways for consumers and business to combat the flood of cheap made in China products that steal American jobs. In Death by China, they write: “Cheap isn’t always the cheapest—Change our attitude.”

Besides the price you pay in the tag, you also have to factor in the risks of injury or death, the increased chances that you or someone you know will lose their job because the unfair trade practices involved in delivering that Chinese product to the market and the various regulatory and taxpayer costs that Chinese product failure entails.

Further, write Novarro and Autry, businesses must recognize the real corporate risk of offshoring in China.

Obvious risks include the loss of the company’s intellectual property, either through outright theft or via China’s policy of forced technology transfers and forced relocation of research and development to Chinese soil….Other risks range from endemic corruption to severe pollution, to the need to scale China’s Great Wall of Protectionism.

American executives offshoring to China must remove their rose-colored glasses and do a far more comprehensive risk assessment….Such a sober look at the real risks associated with offshoring to China should in turn power a new “reshoring” that brings jobs back to America.”

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China’s Interest in Farmland Makes Brazil Uneasy

The following article by Alexei Barrionuevo appeared in The New York Times here.

RUAÇU, Brazil — When the Chinese came looking for more soybeans here last year, they inquired about buying land — lots of it.

Officials in this farming area would not sell the hundreds of thousands of acres needed. Undeterred, the Chinese pursued a different strategy: providing credit to farmers and potentially tripling the soybeans grown here to feed chickens and hogs back in China.

“They need the soy more than anyone,” said Edimilson Santana, a farmer in the small town of Uruaçu. “This could be a new beginning for farmers here.”

The $7 billion agreement signed last month — to produce six million tons of soybeans a year — is one of several struck in recent weeks as China hurries to shore up its food security and offset its growing reliance on crops from the United States by pursuing vast tracts of Latin America’s agricultural heartland.

Even as Brazil, Argentina and other nations move to impose limits on farmland purchases by foreigners, the Chinese are seeking to more directly control production themselves, taking their nation’s fervor for agricultural self-sufficiency overseas.

“They are moving in,” said Carlo Lovatelli, president of the Brazilian Association of Vegetable Oil Industries. “They are looking for land, looking for reliable partners. But what they would like to do is run the show alone.”

While many welcome the investments, the aggressive push comes as Brazilian officials have begun questioning the “strategic partnership” with China encouraged by former President Luiz Inácio Lula da Silva. The Chinese have become so important to Brazil’s economy that it cannot do without them — and that is precisely what is making Brazil increasingly uneasy.

“One thing the world can be sure of: there is no going back,” Mr. da Silva said while visiting Beijing in 2009.

China has become Brazil’s biggest trading partner, buying ever increasing volumes of soybeans and iron ore, while investing billions in Brazil’s energy sector. The demand has helped fuel an economic boom here that has lifted more than 20 million Brazilians from extreme poverty and brought economic stability to a country accustomed to periodic crises.

Yet some experts say the partnership has devolved into a classic neo-colonial relationship in which China has the upper hand. Nearly 84 percent of Brazil’s exports to China last year were raw materials, up from 68 percent in 2000. But about 98 percent of China’s exports to Brazil are manufactured products — including the latest, low-priced cars for Brazil’s emerging middle class — that are beating down Brazil’s industrial sector.

“The relationship has been very unbalanced,” said Rubens Ricupero, a former Brazilian diplomat and finance minister. “There has been a clear lack of strategy on the Brazilian side.”

While visiting China last month, Brazil’s new president, Dilma Rousseff, emphasized the need to sell higher-value products to China, and she has edged closer to the United States. “It is not by accident that there is a sort of effort to revalue the relationship with the United States,” said Paulo Sotero, director of the Brazil Institute at the Woodrow Wilson International Center for Scholars. “China exposes Brazil’s vulnerabilities more than any other country in the world.”

China’s moves to buy land have made officials nervous. Last August, Luís Inácio Adams, Brazil’s attorney general, reinterpreted a 1971 law, making it significantly harder for foreigners to buy land in Brazil. Argentina’s president, Cristina Fernández de Kirchner, followed suit last month, sending a law to Congress limiting the size and concentration of rural land foreigners could own.

Mr. Adams said his decision was not a direct result of land-buying by China, but he noted that huge “land grabs” in Latin America and sub-Saharan Africa, including China’s attempt to lease about three million acres in the Philippines, had alarmed Brazilian officials.

“Nothing is preventing investment from happening, but it will be regulated,” Mr. Adams said.

A World Bank study last year said that volatile food prices had brought a “rising tide” of large-scale farmland purchases in developing nations, and that China was among a small group of countries making most of the purchases.

Foreigners own an estimated 11 percent of productive land in Argentina, according to the Argentine Agriculture Federation. In Brazil, one government study estimated that foreigners owned land equivalent to about 20 percent of São Paulo State.

International investors have criticized the restrictions. At least $15 billion in farming and forestry projects in Brazil have been suspended since the government’s limits, according to Agroconsult, a Brazilian agricultural consultancy.

“The tightening of land purchases by foreigners is really a step backwards into a Jurassic mentality of counterproductive nationalism,” said Charles Tang, president of the Brazil-China Chamber of Commerce, saying that American farmers had bought sizable plots in Brazil in recent years, with little uproar.

Responding to the criticism, Brazil’s agriculture minister said this month that Brazil might start leasing farmland to foreigners, given the barriers to ownership.

China itself does not allow private ownership of farmland, and it cautioned local governments against granting large-scale or long-term leases to companies in a 2001 directive. China also bans foreign companies from buying mines and oil fields.

But as more of its people eat meat, China is expected to increase its soybean imports, mostly for animal feed, by more than 50 percent by 2020, according to the United States Department of Agriculture. Last month, Chongqing Grains signed a $2.5 billion agreement to produce soybeans in the Brazilian state of Bahia. Last October, a Chinese group agreed to develop about 500,000 acres of farmland in Río Negro Province in Argentina.

In both cases, Chinese officials proposed buying large tracts of land before local officials steered them toward production agreements.

“We are never going to sell the land,” said Juan Manuel Accatino, the minister of production in Río Negro.

Brian Willott, an American farmer who came to Brazil in 2003, said Chinese interest in buying farms had not abated. “Everywhere you go to look at a farm they say, ‘We are considering selling to the Chinese,’ ” he said.

In Goiás State, nearly 70 percent of the soy grown went to the Chinese last year, and the Chinese are seeking to use about 20 million acres of pastureland that has not been cultivated for decades.

“For them, the faster the better,” said Antônio de Lima, Goiás’ agriculture minister.

Farmers here say they share Chinese officials’ goal of breaking the stranglehold of international trading companies like Cargill and Archer Daniels Midland.

But Tan Lin, a manager at the Chinese company involved in Goiás, said he doubted Chinese companies were ready to replace them.

“I don’t see that the Chinese companies working here have that expertise yet,” Mr. Tan said. But “if you can do that, it is good, of course.”

Reporting was contributed by Myrna Domit from São Paulo, Brazil, Charles Newbery from Buenos Aires, David Barboza from Shanghai and Keith Bradsher from Hong Kong.

Posted in AgricultureComments Off

Deere announces another investment in China

The following article by the Associated Press appeared in the Chicago Tribune here.

MOLINE, Ill.— Deere & Co. will spend $60 million to build a new engine manufacturing plant in China for its agricultural, construction and forestry equipment.

Deere’s new engine plant will near several of the Moline, Ill., company’s other facilities in Tianjin, China.

Tuesday’s engine plant announcement is the second investment in China that Deere has announced in the past week. Last Wednesday, Deere said it would spend $80 million on a new equipment manufacturing plant in northeast China.

The new engine plant will be Deere’s sixth worldwide. The others are strategically located in America, Argentina, France, India and Mexico. Deere says the new engine plant could start production in late 2013.

Posted in TradeComments Off

China Appeals Against WTO Ruling On Tire Exports To US

The following article appeared in the Daily Media Report of the American Iron and Steel Institute on May 25, 2011.

GENEVA — China has appealed against the World Trade Organization’s rejection of its complaint over punitive US tariffs on Chinese tire imports, the trade body said Tuesday.

“On 24 May 2011, China notified the Dispute Settlement Body of its decision to appeal the panel report in dispute case DS399, ‘US — Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tires from China’,” the WTO said on its website.

Beijing lost its case against Washington in December, when the WTO cleared the United States for invoking a safeguard clause in 2009 in the Asian giant’s WTO accession agreement to impose punitive duties on Chinese tires over three years.

WTO arbitrators ruled that China “failed to establish prima facie that the tires measure exceeds the period of time necessary to prevent or remedy the market disruption.”

The tire dispute ignited the first trade spat of US President Barack Obama’s presidency with the Asian giant, with warnings that a rise in Chinese-made tires had cost more than 5,000 US jobs.

The United States can file a counter-appeal within 10 days.

Posted in TradeComments (1)

Senate TAA letter

Sens. Brown, Stabenow, Rockefeller, Casey, Bingaman, Cantwell Lead Group Of 41 Senators To Tell President Obama: Hold Firm On Halting Free Trade Agreements Until Trade Adjustment Assistance Is Extended-Senators Request Extension of 2009 TAA Reforms to Cover Service Workers and Job Losses to Non-FTA Countries Like China, Updates to Health Care Tax Credit

May 23, 2011

WASHINGTON, D.C. — Forty-one U.S. Senators—led by Sherrod Brown (D-OH), Debbie Stabenow (D-MI), Jay Rockefeller (D-WV), Robert P. Casey, Jr. (D-PA), Jeff Bingaman (D-NM), and Maria Cantwell (D-WA)—sent a letter today to President Barack Obama reinforcing his decision not to submit any free trade agreements to Congress—including pending agreements for Colombia, Panama, and South Korea—until Congress agrees to extend a long-term extension of Trade Adjustment Assistance, including the 2009 bipartisan reforms.

The senators asked the President to work with them to secure bipartisan support for an extension of the Recovery Act-version of TAA, including coverage for service workers as well as workers who lose their jobs to countries other than those with which the United States has formal free trade agreements, including China. This version of TAA also covers an expanded version of the Health Coverage Tax Credit (HCTC), which helps Delphi retirees and other trade-affected workers afford private health insurance.

“We have an obligation to take care of American workers and American industry first. TAA is one critical piece to rebalancing our trade policy, along with strengthened trade enforcement. Too often, we pass free trade agreements and then turn our backs on the American workers who have watched their jobs go to Mexico or China,” Sen. Brown said. “At a minimum, we cannot move forward on any other trade agreements until updates to Trade Adjustment Assistance and the Health Care Tax Credit are passed, and I applaud the President for standing with workers on this issue. With more and more American and Ohio jobs moving to countries like China and India, we need to ensure that these hardworking men and women have the skills to compete for new jobs. TAA is a win-win for Americans training for new jobs and employers looking for a skilled workforce.”

“Congress should not be considering new trade agreements before renewing protections for people whose jobs are sent overseas,” said Sen. Stabenow. “Along with extending retraining to help workers transition to the industries of the future, it is time to strengthen trade enforcement and finally get tough on China and other countries violating fair trade rules. U.S. trade policy should put American families and businesses first.”

“Before we focus on trade agreements with other countries, we must first and foremost take care of American workers who are looking for work or may have lost their jobs to outsourcing,” said Sen. Rockefeller.  “We must extend TAA assistance for the many American workers who need it to help put food on the table and get needed training for new jobs.  I have seen too many West Virginia families suffer because their jobs were moved out of this country.”

“If we truly want to get America get back on the road to prosperity, then we must ensure our workers have the proper tools to be able to find new employment. TAA helps workers, who have lost their job due to outsourcing production outside the United States, do exactly that.  In the current economic environment, it is critical that we restore this vital program, especially before considering additional trade agreements,” Sen. Casey said.

“TAA has been a pillar of U.S. trade policy for decades. Congress modernized the program in 2009 to meet the needs of today’s economy by extending TAA eligibility to people in the services sector and factoring in trade competition with non-FTA countries. Because of these changes, TAA has been a lifeline for hundreds of thousands of American workers over the past two years.  As Congress prepares to consider the pending trade agreements, we must strengthen the safety net for middle class workers by extending these critical job retraining, health insurance and unemployment insurance benefits,” said Sen. Bingaman, a senior member of the Senate Finance Committee and long-time TAA advocate.

“We need to make sure American workers have the skills they need for 21st century jobs that grow our economy,” said Sen. Cantwell. “Trade Adjustment Assistance has provided vital retraining to thousands of displaced Washingtonians to get back into the workforce. Moving forward, we must extend this critical program so workers impacted by trade have the support they need to find new jobs in emerging sectors of the economy.”

The letter was also signed by Senators Ron Wyden (D-OR), Tom Harkin (D-IA), Patty Murray (D-WA, Chuck Schumer (D-NY), Dick Durbin (D-IL), Ben Cardin (D-MD), Barbara Boxer (D-CA), Carl Levin (D-MI), Kirsten Gillibrand (D-NY), Richard Blumenthal (D-CT), Tom Udall (D-NM), Sheldon Whitehouse (D-RI), Jack Reed (D-RI), Kent Conrad (D-ND), Bob Menendez (D-NJ), Michael Bennet (D-CO), Al Franken (D-MN), Amy Klobuchar (D-NM), Herb Kohl (D-WI), Jeff Merkley (D-OR), Frank Lautenberg (D-NJ), Mark Begich (D-AK), Chris Coons (D-DE), Kay Hagan (D-NC), Claire McCaskill (D-MO), Barbara Mikulski (D-MD), Jeanne Shaheen (D-NH), Bernie Sanders (D-VT), Joe Manchin (D-WV), Daniel Akaka (D-HI), Mark Udall (D-CO), Jon Tester (D-MT), Tom Carper (D-DE), Daniel Inouye (D-HI), Patrick Leahy (D-VT), and Bill Nelson (D-FL). The full text is below.

Dear President Obama:

We share the goal of your National Export Initiative to double U.S. exports and are looking forward to working with you on implementing a strong trade and competitiveness strategy. We are writing to support your decision to insist that Congress agree to extend Trade Adjustment Assistance (TAA), including a long term extension of the 2009 bipartisan reforms, before you submit the pending trade agreements with South Korea, Colombia, and Panama. We recognize, as you do, that such a deal will be challenging to secure because it requires significant bipartisan commitments in both chambers of Congress to vote in favor of a TAA extension. The challenge is worth it. We agree with you that strengthening the safety net for the middle class by extending TAA should be a prerequisite for the consideration of new trade agreements.

TAA has been a core pillar of U.S. trade policy. The program ensures that workers who lose their jobs and financial security as a result of globalization have an opportunity to transition to new jobs and emerging sectors of the economy. Important reforms were made to TAA in 2009, which have helped streamline the program and make it more efficient for beneficiaries. In 2009, Congress also expanded eligibility to all workers whose jobs have been moved offshore, regardless of whether the United States has a trade agreement with the particular country. It also recognized the important role of the service industry in the U.S. economy by bringing service workers into TAA.

The program also improved and expanded access to TAA’s Health Coverage Tax Credit (HCTC) – an initiative that promotes private health insurance access for recipients, and makes health insurance coverage more affordable to workers who lose their jobs due to trade and offshoring.  In the absence of this program, more Americans would need public assistance and more individuals nearing retirement would be forced to use the emergency room as their sole source of health care.

These bipartisan reforms to the TAA program help hundreds of thousands of workers, in every state, by moving workers more quickly from government support to private sector jobs. Since new TAA began in May 2009, the program has assisted 185,000 Americans who may have otherwise been ineligible for services, with usage in some states increasing by more than 40 percent. The 2009 reforms also help ensure accountability and results by requiring data on performance and worker outcomes, enabling Congress to identify where improvements are needed.  Unfortunately, these critical TAA reforms expired on February 12, 2011. Just this month, the Department of Labor denied the first three petitions filed by groups of workers seeking TAA assistance under pre-2009 eligibility. The continued denial of critical training will impede private sector employment in emerging sectors of the economy.

While we the undersigned may have differing views on elements of the trade agenda – with some of us looking forward to supporting the pending trade agreements with South Korea, Colombia, and Panama, and others skeptical of the impact of the agreements –we are unified in our belief that the first order of business, before we should consider any FTA, is securing a long-term TAA extension.

We look forward to working with you to extend and implement TAA as part of broader trade and competitiveness strategy that creates jobs and builds the middle class.

Posted in TradeComments (3)

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Ian Fletcher’s: “The Conservative Case Against Free Trade”

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