Exclusive: Masking Appeasement Behind International Law?

by WILLIAM R. HAWKINS July 19, 2010
Now that the U.S. Treasury has failed to follow its own evidence and brand the People’s Republic of China as a regime that manipulates its exchange rate to gain a competitive advantage in international trade, the question is what will happen next? Will Congress step in and do what the executive branch will not?
 
Late last month, Sen. Charles Schumer (D-NY) said he and other senators will move forward with legislation that would impose tariffs on China goods to offset Beijing’s fiat currency policy. It should also reduce the massive U.S.-China trade deficit that is slowing America’s economic recovery. Schumer has had such legislation in the offering for many years, but has not dared to buck the White House and Senate leaders (from both parties) by forcing a floor vote he would undoubtedly win. No one wants to be on record supporting China, but many would like to duck the issue.
 
I was on a panel at the Heritage Foundation discussing Chinese policy on May 3, 2006. The keynote speaker was Sen. Lindsey Graham (R-SC), the lead co-sponsor of the Schumer bill. He mentioned that support for the bill had been purposely tapped down to keep it from looking too strong because he did not really want to pass it. He was referring to a test vote when the legislation was offered as an amendment to the State Department Authorization bill on April 6, 2005. The motion to table (i.e. kill) the amendment failed by a vote of 33-67, but then Sen. Schumer withdrew it, thus snatching defeat from the jaws of victory. Sen. Graham said the bill could have gotten many more votes.
 
President George W. Bush had threatened to veto the Schumer-Graham legislation in order to maintain good relations with Beijing. On June 23, 2010, The Hill newspaper that covers Congress reported, “The White House has pressed Sen. Charles Schumer (D-N.Y.) not to offer his China currency legislation as a floor amendment, where it would almost certainly be approved, according to two sources. White House Chief of Staff Rahm Emanuel is one of several figures in the [Obama] administration to have contacted Schumer to pressure him to hold back.” There is a bi-partisan consensus among elites to appease China, even as the grass-roots want action against a rising threat. Thus, so-called “leaders” strive to keep popular legislation from coming to a vote.
 
A House bill, “The Currency Reform for Fair Trade Act of 2009” (H. R. 2378) has 128 sponsors (85 Democrats and 43 Republicans).Rep. Sander Levin (D-MI), chair of the House Ways and Means Committee Chairman that oversees trade policy, is not among the sponsors. He has suggested instead that the currency issue should be sent to the World Trade Organization. Filing a case with the WTO is long and tedious, with the outcome far from certain given the legalistic gymnastics required to persuade foreign judges to side with the United States. Most of the world relies on dumping into the American market to bolster domestic production, so WTO staffers are reluctant on principle to do anything that would help the U.S. protect itself.
 
Even if the U.S. won, it is not clear it would mean anything. Consider the case filed in 2004 against Airbus for collecting $20 billion in low-interest loans from European governments to launch and sustain its civilian-airliner business. The U.S. alleged that these loans were essentially unfair subsidies that gave Airbus a cost advantage over Boeing in international competition. The U.S. won the case this June 30 after six years of legal struggle. The Airbus consortium of Britain, France, Germany and Spain has been ordered to remove the subsidies within 90 days, but they are not likely to do so. Also, the new Airbus A350 is not covered because its launch aid was not yet on the books when the complaint was filed. The U.S. request to have the A350 covered was rejected.
 
Even a more complete “victory” would be hollow as the WTO has no enforcement mechanism. It is up to the winning party to back rulings with trade sanctions. Few expect the Obama administration to impose tariffs on European Union members. Indeed, there is an even chance that the administration will award the $35 billion contract for a new Air Force aerial refueling tanker to the European Aeronautic Defence and Space Company for its Airbus design. The Bush administration already tried to award EADS the contract in 2008, but Boeing got the award overturned for unfair procedures. Robert Gates, however, is still the Defense Secretary and is an advocate of sending military production overseas if he can get a better price or can please allies--- even if the allies can offer a better price only by using unfair methods against American firms. For U.S. officials, appeasement comes in many forms.
 
Another WTO case, especially if used as an alternative to Congressional action, would further indicate that the United States is giving up its sovereign right to act in its own defense without the permission of an international organization. It should be remembered that Rep. Levin’s brother is Sen. Carl Levin (D-MI) who when the Iraq War started argued that no matter how many nations were in the U.S. coalition, America was still acting “unilaterally” and “illegitimately” without first getting permission from the United Nations.
 
The U.S. has just had another demonstration of how the UN works to frustrate American aims. On March 26, the Republic of Korea corvette Cheonan was sunk in the Yellow Sea with the loss of 46 lives. Six weeks later, an international investigation concluded that the ROK warship had been hit by a North Korean torpedo. Both Seoul and Washington promised there would be a serious response to the attack. Secretary of State Hillary Clinton proclaimed that there, "Will not be and cannot be business as usual." Yet, all the allies did was refer the matter to the UN Security Council.
 
On July 9, the UNSC issued a weak statement that fudged responsibility for the attack and opposed any retaliation. It noted the investigation, “which concluded that the DPRK was responsible for sinking the Cheonan” and “the Security Council expresses its deep concern.” But then the document noted that the Democratic People’s Republic of Korea had “stated that it had nothing to do with the incident.” The UNSC then condemned the attack, but not Pyongyang explicitly, and called only for “peaceful measures to be taken against those responsible for the incident.” North Korea's UN Ambassador Sin Son Ho called it “our great diplomatic victory.”
 
Joint U.S.-ROK “show of force” naval exercises against North Korea were postponed to give the UNSC a chance to act. Now the Obama administration is dithering over when and how to conduct the exercises because of strong Chinese objections to sending American warships into the Yellow Sea. Beijing often calls the Yellow Sea its “territorial sea” despite its legal status as international waters. The Chinese communists are standing four-square behind the Korean communists. From June 29 to July5, Beijing held its own naval exercises in the area.
 
China is usually portrayed as being only a “rising” competitor to the United States. Despite a booming economy and a rapid military modernization program, on paper its capabilities are still far behind what America can do. Yet, in Washington, Beijing is already being treated as if the balance of world power has shifted in its favor. And, perhaps in terms of having the will to act in its own behalf, this is an accurate assessment of Chinese superiority.
 
FamilySecurityMatters.org Contributing Editor William R. Hawkins is a consultant specializing in international economic and national security issues. He is a former economics professor and Republican Congressional staff member.
 

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