“Feeding the Dragon”-- U.S. tax dollars are being spent to make China more energy-efficient
Yesterday, the House Foreign Affairs Subcommittee on Asia and the Pacific held a hearing titled “Feeding the Dragon: Reevaluating U.S. Development Assistance to China,” to investigate why the federal government is planning to spend American tax dollars to help make Chinese manufacturers more energy efficient.
USAID Assistant Administrator for Asia Nisha Desai Biswal, the lone witness at the hearing, fielded a series of angry questions from members who expressed their outrage that U.S. tax dollars are funding the modernization of China, while China continues to utilize predatory trade practices to undercut American manufacturing. Concerns about China’s poor human rights track record were also expressed by a number of members.
In his written testimony, Subcommittee Chairman Donald Manzullo (R-IL) outlined his frustrations with foreign aid being allocated to China:
“What is being proposed here, essentially, is that we borrow money from China to give back to China to help it fix its own domestic problems, many of which were created in their breakneck rush to develop. At the same time, these programs help boost the competitiveness of Chinese manufacturers at the expense of U.S. manufacturers and U.S. jobs. In my opinion, this is a fool’s errand and the U.S. government needs to clean up its own fiscal trail before helping China clean up its environmental mess.”
“China’s behavior on multiple levels, demonstrates a concerted effort to advance economic growth regardless of the consequences. Indeed, Chinese leaders count on economic growth to offset the lack of political and religious freedoms in that country. As a result, American manufacturers face unprecedented challenges from illegal Chinese government subsidies, an artificially low exchange rate, and rampant systematic theft of intellectual property. None of this is new information, and the American people are sick and tired of China’s unfair trade practices. To drive home this point, the U.S. intelligence community released a report just last month detailing the depth and breadth of China’s organized industrial espionage efforts. The findings are truly scary. No amount of U.S. government assistance will change China’s intentions to steal our secrets, take our manufacturing jobs and advance its own agenda.
“The 16th Congressional District of Illinois, which I have the honor of representing, depends heavily on manufacturing for its livelihood. Manufacturing accounts for approximately 25 percent of the local economy or double the national average. We need to be supporting U.S. manufacturers in Illinois and nationwide to compete with China, not throwing money away to help China compete with us. The American people deserve more from their tax dollars at work beyond spending it on programs aimed to fuel a clean energy revolution in China at the expense of job growth back home.”
Congressman Steve Chabot (R-OH) found it hard to believe that we are borrowing money from China and then giving it back in aid programs. Here is an exchange between Rep. Chabot and Administrator Biswal that highlights how China’s currency manipulation adds to the frustration of the situation:
Rep. Chabot: Let me ask you this – We have a trade deficit with China right now, is that correct? In other words, we’re importing a whole lot more from them - all you gotta do is go to Wal Mart, and an awful high percentage of what is labeled there, if you pick it up and look under it, it’s gunna say Made In China - a lot less that we export to them. Now, we have GE aircraft engines and other things that go on planes that we sell to them, so its not that we don’t sell them anything, but we… a lot more Chinese products come into the United States than US products that go there, isn’t that accurate?
Administrator Biswal: You are correct, it’s also our largest export growth market.
Rep. Chabot: And we have a huge surplus to the extent that we’re borrowing from them, correct? It’s not like they’re borrowing from us, and it’s to the tune of almost a trillion dollars at this point that we owe them, it that correct?
Administrator Biswal: I have no reason to doubt that. I’m not the expert on the amount.
Rep. Chabot: And there’s an awful lot – and I’m almost out of time – but there’s an argument that they’re manipulating the value of their money in order to continue this huge, uh, continuing US importing Chinese products, and that’s costing us American jobs a lot of people would argue, isn’t that correct?
Administrator Biswal: So… That is correct
Rep. Chabot: All that being given, it just seems to me you’re gunna have a hard sell explaining to the American people why we oughta be using US tax dollars to fund something like this – why can’t China use their own money? And I’ll yield back, Mr. Chairman.
Administrator Biswal: May I respond briefly? Um, Mr. Chabot, my only response to, to the points that you raised, which I agree are all, um, important points for consideration, is that our programs – particularly our environmental programs in China – are fundamentally advancing our interests, and those interests are associated with the amount of pollution in the United States that is traced back to Chinese sources, and the fact that if we do not engage in addressing that pollution, in light of the explosive growth that China is experiencing, that harmful effects here in the United States are going to become increasingly costly, both in terms of the health impacts and the economic impacts.
According to the Economic Policy Institute, Ohio’s 1st congressional district – represented by Rep. Chabot – lost 4,639 net jobs due to our trade deficit with China over the last decade, which surged from $83 billion in 2001 to a record $273 billion in 2010. Yet, Rep. Chabot has not cosponsored H.R. 639, which would hold China accountable for currency manipulation. H.R. 639 currently has 230 cosponsors, including 60 Republicans.
Other Republican members weighed in as well. Congressman Bill Johnson (R-OH) added his dismay at the fact that the Chinese government subsidizes their domestic industries to gain an unfair competitive advantage, leaving U.S. companies in the lurch. He stressed the notion that the Administration needs to address these trade barriers first so that American companies can once again compete on a level playing field. Congressman Dana Rohrabacher (R-CA) reminded the committee that China’s “monstrous dictatorship” has a poor track record on trade and human rights. He expressed his shock that “we would permit the massive transfer of wealth from the United States to China” after witnessing the Tiananmen Square massacre.
Read Administrator Biswal’s testimony here.
Read a Bloomberg Businessweek article on the hearing here.
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