Jewish World Review Dec. 16, 2003 / 21 Kislev, 5764

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Trade deficit with China a big problem | Chinese Prime Minister Wen Jiabao concluded his first visit to the United States this week, calling his whirlwind three days here both pleasant and very successful. President Bush gave Premier Wen a warm White House welcome, including a 19-gun salute. Bush also offered a plea to Premier Wen to reverse the huge trade deficit with China, which is quickly becoming a political vulnerability in the president's upcoming bid for re-election.

In addition, Bush gave the world new rhetoric to describe U.S. relations with China. The president, who once described China as a strategic competitor, this week declared that China is our "partner in diplomacy."

In an almost immediate confirmation of that partnership, Bush emerged from his discussions with Wen to warn Taiwan President Chen Shui-bian not to hold a referendum condemning China's buildup of ballistic missiles across the Strait of Taiwan.

I talked with Premier Wen in Boston at the conclusion of his visit, and in his only interview with an American journalist, the premier told me, "We appreciate the reaffirmation by President Bush of his one-China policy, and for his sending a clear signal to Taiwan security forces. We have to admit . in our economic and trade relationship, problems do exist."

Problems, indeed. Not only is our trade deficit with China likely to top the year at $130 billion, but thousands upon thousands of high-value American jobs have been lost to Chinese imports and competitors. And China has again rebuffed the United States' call to abandon the peg of the Chinese yuan to the dollar. Additionally, the United States has just slapped quotas on some Chinese textiles.

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Wen insisted to me that the rapid expansion of trade has benefited both countries. As you might expect, he suggests the solution is not to cut Chinese imports, but rather to increase U.S. exports to China.

Wen outlined five proposals to Bush, including better communication on bilateral commerce and trade.

"We (should) seek mutual benefits and win-win results," Wen told me. "We should look at the larger picture and larger interests of our trade for each country."

Chinese officials rather ambitiously estimate that they will import up to $1 trillion of U.S. merchandise in the coming three years.

Unfortunately, trade inequities with the Chinese are only a fraction of the trade issues facing the United States. And the biggest U.S. trade deficit increase over the past five years has been with the European Union, not with China.

Trade analysts say that China, members of the EU and several other countries are merely doing what any country would do given the opportunity. They say the lack of strong U.S. trade policy is the problem.

"Since the Industrial Revolution, most countries follow policies geared to benefiting their domestic industries, either by boosting their exports or their competitiveness or by putting obstacles in the path of imports from rivals," says William Hawkins, senior fellow at the U.S. Business and Industry Council Education Foundation.

But rather than strictly enforcing our trade revenue laws, we are accepting goods on a largely unrestricted basis from cheaper foreign markets. Multinational companies are continuing to open operations in low-wage China instead of in this country. In fact, China surpassed the United States as the most popular destination for foreign direct investment last year. And 10 of China's top 40 exporters are U.S.-based companies such as Motorola.

"We've essentially given our trade policy over to transnational corporations who do not have an interest in the United States or interest in any particular country," Hawkins says. "Because of that, we don't have any part of our government - any agency, any committee - that thinks seriously about the future of our economy or its competitiveness."

The Chinese are obviously thinking seriously about the future of their economy. Once again, the United States is running a serious deficit.

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Lou Dobbs is the anchor and managing editor of CNN's "Lou Dobbs Moneyline." Comment by clicking here.

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