As the People’s Republic of China privatizes companies, there is the illusion that the country is transforming from a communist state to a more capitalist society, like the United States. The reality is dangerously different. The “Socialist Market System” (SMS), as the Chinese call it, is very much what the name implies: a socialist system.
While there are industries with private ownership in China, they are “secondary and service industries,” according to economist Dr. Pat Choate. The key strategic industries are still controlled by the Chinese government, and they keep a heavy hand on the so-called private ownership in their country. This results based system is likely a key reason The World Fact Book listed China as having the world’s largest trade surplus in 2007.
China undermines the World Trade Organization (WTO), keeping the U.S. at a grave disadvantage. Chinese nationalism seems to place the world economy at risk by abusing the ideals of “free trade.” In August, China created a “Green Tax” after the WTO ruled that their 25 percent tariff on imported cars and car parts had to stop. To offset this ruling, the Chinese government issued a tax on cars with engine capacities over 3 liters, while reducing the tax on engines consuming 1 liter or less. Since Chinese made vehicles are built with a 2 liter capacity or less, the tax favors Chinese built parts and vehicles and harms all exporters to China, including the U.S. The Chinese government claims the tax was strictly an eco-friendly effort, but this is hard to believe coming from a country with such lax environmental policies.
This type of deception is not new. When Congress attempts to compensate for unfair subsidies, China files complaints against us with the WTO. The U.S. is left on the short end of the stick both at home and abroad. If the U.S. is only buying imports, without selling exports, we lose. The World Fact Book listed the United States as having the world’s largest balance of trade deficit in 2007, by way of an estimated $731 million. The estimated deficit for 2008 is over $800 billion.
Last year’s numbers speak for themselves, the U.S. needs to export more than we import. We will never be able to accomplish this goal locked in un-fair trade agreements, like the WTO. Exports mean good jobs, industry and manufacturing, and U.S. wealth. Imports mean dead-end jobs at places like Wal-Mart as we watch our money get shipped overseas.
China is now defeating us by using the mercantilist policies the United States used until the 1930s. They are using a results based system as their one national party looks out for the betterment of China, rather than a two party system battling for their own interests. China realizes what the U.S. used to know: industry is key to national security.
China has fine-tuned its economy to compete. By regulating foreign investment, the Chinese government limits investors and maintains tight control. This gives China funding and expert direction, yet they lose no ground. It is the opposite in the open market system the United States, which allows a massive liquidation of our wealth producing companies to foreign nations like China.
Though the U.S. should avoid socialism, this is an example our leaders should learn from. If we are ever to regain ground in global trade we must be able to compete with other countries. One solution would be lowering U.S. wages to allow domestic companies to charge less. However, this solution is flawed, as Americans are already living in debt and can no longer afford the high prices of food or gasoline (prices have fallen, but are on the rise again). Currently, the cost of living is going as the job market continues to fall.
Henry Ford knew what he was doing when he priced his automobiles at a level his workers could afford. He created a market, and put the money he spent on labor right back into his own pocket. This is the type of foresight American companies and government need today.
Consumers are smart enough to look for the best deal for them now. They cannot be expected to buy American products in an effort to help our economy if prices are too high. This would just increase our already escalating private debt. To be truly competitive, shoppers must be encouraged to buy domestically as they are in China: with higher prices on foreign imports.
Free trade allows countries to bring their cheaply made goods into the country at minimum costs. By importing goods and charging less, sometimes even below production cost, these companies can target and eliminate American competition one by one. We need to enact protective tariffs that will allow U.S. manufacturers to compete with China and other nations' low wage workforce and lax pollution regulations. Our lack of tariffs forces American corporations to outsource everything from manufacturing to phone support; even our IT, art and animation. Too many American jobs are outsourced to countries like India, China and Mexico. This means that China imports even more products into the U.S. under American brand names and we in turn export even more of our cash back to them.
The United States has worked hard to get where we are only to lose everything in a few decades. We need to compete in the global trade competition. As we stand right now we are losing. Rather than lower our standards on living, food, and environmental protection we must get out of free trade agreements and organisations so we can create fair trade conditions that protect our ability to compete. Then will we be able to re-instate tariffs and bring our jobs back fairly- through competition. Only when the prices and products are competitive can everyone, in every country, truly win.