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Posts Tagged ‘Chinese unfair trade’

China seems to practice dumping of under-priced goods to purposely drive it’s international competitors out of business then follow this up by doubling and tripling prices.  Case in point: rare earth minerals.  Currently China produces 95-99% of the world’s rare earth minerals which are used in high-tech devices.  This is essentially a monopoly.  Prices have gone through the roof and China has been restricting supply to foreign competitors.  At the same time, it is waving the carrot of access to its rare earth supply if foreign companies locate their production in China (so that China can then appropriate their intellectual property and production capital as well).

However, China only has 1/3 of the world’s rare earth supply.  In the 80’s the US supplied a major share but mines were driven out of business by low-priced minerals that flooded the market from China.  Now that China has squeezed the supply and raised prices manifold, these same mines are in the process of reopening, but the damage to our industry has already been done (just look at our economy these days).  Of course China will surely repeat the process once international rare earth production gears up.

Another example is with fluorescent lighting.  Cheap Chinese fluorescent lights flooded US markets in the last 2 decades.  They drove domestic manufacturing out of business.  (Remember how getting energy-efficient was supposed to be good for the US economy, according to Obama?  Well, it just sent money to China.)  Now that they have done so, they have jacked up prices by double, and that’s just the beginning.  I know this from personal experience in buying fluorescent lighting for my business.

So when you buy Chinese goods for their low-price, just remember what you are doing.  You are destroying domestic competition in favor of Chinese goods dumped on our shores at below-cost prices.  As soon as they have driven your countrymen out of business, you will be paying more than you were before the Chinese.  Just think about that the next time you decide that all that matters is price.  Economics and trade are more complicated than that.

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A recent article in the LA Times, http://www.latimes.com/business/la-fi-china-jetliner-20101113,0,4824354.story hightlights one of the many unfair trade practices that the Chinese have implemented to put themselves at an advantage over their trading partners.  They are keen on entering higher-end manufacturing segments, such as large plane aviation, and this article details their efforts in building a passenger plane to compete with the likes of the Boeing 737.  There’s nothing wrong with wanting to build a plane, however, they’re going about it by requiring that outside suppliers, such as Rockwell or GE, partner in joint ventures with state-owned Chinese companies.  This way, all the foreign technology can be adopted by Chinese companies and they can later wave goodbye to the Americans when they’re done!  Not only that, but state-owned airlines will be required, if not strongly encouraged by the government, to buy planes from their domestic producers.  So then you will have Chinese plane manufacturers with a protected home market, government-subsidized production, and research cost that was skipped by stealing foreign technology. Then, they’ll be able to undercut Airbus and Boeing through their continued Yuan undervaluation and these factors.

Such unfair Chinese trade practices must be countered.  We should require that any Chinese companies wanting to do business in the US be required to have domestic joint venture partners.  We should require that Chinese producers manufacture a portion of their products in the US.  We should also require our federal government contractors to have a minimum of American equipment or supplies or set a ceiling for Chinese products.  I am all for free trade, but the trade we have with China is anything but fair.  Our government is betraying our interests by kowtowing to the Chinese and selling our jobs overseas in exchange for financing our budget deficit.  I would much rather piss of China and have them stop funding our debt-addiction than lose another single job to them because of this.  The American people have to wake up and stop blaming all our problems on cheaper Chinese labor.  The reality is far more complex.

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