Heartland hurt has many asking: Is China worth it? | McClatchy

Heartland hurt has many asking: Is China worth it? | McClatchy

By Kevin G. Hall | McClatchy Newspapers

SHARON, Pennsylvania — With a heavy heart, Wheatland Tube Co. President Bill Kerins surveys an empty lot where just a few years ago, a massive steel-pipe plant that employed hundreds of workers stood.

Needing to expand production, Wheatland purchased that plant in 2002. Within a few years, however, cheap imports of standard pipe from China surged from a meager 10 tons to more than 750,000 tons by 2007.

"It came in at prices we couldn't even consider competing with," Kerins said. "Finished product was brought in at less than our cost of raw materials."

Wheatland Tube sought relief through trade laws, but by the time the Bush administration acted, it was too late. The plant closed in 2007, and more than 200 jobs were lost.

The woes where western Pennsylvania meets northeast Ohio are the back story to the growing tension over China's trade policy and currency manipulation.

By April 15, the Treasury Department must declare whether it thinks that China manipulates its currency, the yuan, to give its own manufacturers a leg up on American competitors such as Wheatland Tube.

This fight over China's currency blossoms every spring in Washington, about the same time the cherry trees that ring the Tidal Basin do. This year, however, the U.S. economy's struggling to create jobs and reduce a high unemployment rate. That puts greater focus on what trade with China, now second only to Canada, means to U.S. jobs.

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Another source of anger in the U.S. business community is China's "indigenous innovation policy," where state-owned companies are encouraged to "Buy China." A survey by the American Chamber of Commerce in China, published March 21, found that 37 percent of its members reported a drop in sales even before the policy took effect. The Buy China policy further disadvantages U.S. companies operating there.
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"The yuan is undervalued by at least 25 (percent) to 40 percent," said Fred Bergsten, head of the Peterson Institute for International Economics, the leading free-trade voice among policy research organizations.

Unless China revalues its currency, he said, U.S. exports — a job-creation priority for the Obama administration — will continue to suffer from China's "blatant protectionism." He estimated that China's artificial exchange rate is costing the U.S. in the range of 1.5 million jobs.
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China's now the third-largest market for U.S. exports behind Canada and Mexico, and is one of the most important destinations for U.S. agricultural products and a beacon for U.S. service providers. Restricting China trade isn't an option, Kirk suggested.

"Where do we think we will replace that $300 billion in exports if we unilaterally pull out of China?" he asked. "I think it's much more worth the effort to try to engage them, and try to get them to reform some of their manufacturing policies, not only to our benefit but to their benefit, which is the case President (Barack) Obama is making."
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