Obama Vow to Get Tough on Unfair Trade Called ‘Long Overdue’

President Barack Obama’s vow to get tough on unfair trade practices was welcomed by manufacturers frustrated with losing market to countries such as China.

In last night’s State of the Union address, Obama said he is creating a new trade enforcement group that would use investigators and other federal resources to combat unfair trade practices in nations including China. He also called on Congress to create a program to provide credit to companies competing against foreign counterparts that benefit from preferential credit from their governments.

“It’s long overdue,” Scott Paul, the executive director for the Alliance for American Manufacturing, a trade group that includes the Pittsburgh-based United States Steel Corp. (X), said yesterday in an interview. “We have seen 10 years of China gaming the system and I think the president has a very good record with China.”

Obama called for tax cuts for U.S. manufacturers, increased deductions for making high-technology products in the U.S., and financing assistance for new plants, equipment and training.

“It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized,” Obama said.

Some U.S. industries have complained that the Obama administration hasn’t done enough to compete with China, the world’s second-largest economy. The U.S. had a $273 billion trade deficit with China in 2010, with U.S. producers and some lawmakers complaining that their exports are hurt by China intentionally keeping its currency undervalued.

Pearl River Mart employees move boxes of merchandise imported from China into the company's warehouse in the Brooklyn borough of New York. In last night’s State of the Union address, President Obama said he is creating a new trade enforcement group that would use investigators and other federal resources to combat unfair trade practices in nations including China. Photo: Jonathan Fickies/Bloomberg Close

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Pearl River Mart employees move boxes of merchandise imported from China into the company's warehouse in the Brooklyn borough of New York. In last night’s State of the Union address, President Obama said he is creating a new trade enforcement group that would use investigators and other federal resources to combat unfair trade practices in nations including China. Photo: Jonathan Fickies/Bloomberg

WTO Complaints

The U.S.-China Business Council said in a statement that it wanted to hear more about the new enforcement group, though it pointed out there are already avenues to bring complaints against Chinese trade policies. In addition to direct negotiations, the U.S. can conduct investigations or file World Trade Organization complaints. The group supports the financing to put U.S. companies on equal footing with Chinese competitors.

“Most of the answers to economic growth are here at home,” John Frisbie, the group’s president, said in the statement. “To succeed in the years ahead, we need smart policies on taxation, energy, education, infrastructure, trade, investment, and innovation to maintain the competitive leadership of American companies and workers.”

Obama has filed five World Trade Organization complaints since taking office three years ago, compared with the seven that George W. Bush filed from 2001, when China joined the Geneva-based trade arbiter, and the end of his term in 2009. Obama imposed duties on Chinese-made tires, which he said has created more than 1,000 U.S. jobs.

Trade Deficit

The U.S. has other investigations in progress, and the Commerce Department said last week it would investigate Chinese makers of wind towers after the Wind Tower Coalition claimed China sells renewable-energy equipment in the U.S. below fair value.

Focusing on trade is part of Obama’s initiative to double U.S. exports to $3.14 trillion by 2015, from $1.57 trillion in 2009. He also said he would push for enhanced trade inspections to stop pirated and counterfeit goods before they enter the U.S.

“Congress should make sure that no foreign company has an advantage over American manufacturing when it comes to accessing finance or new markets like Russia,” Obama said. “Our workers are the most productive on earth, and if the playing field is level, I promise you -- America will always win.”

Timing Questioned

The U.S. had a $47.8 billion trade deficit in November, with $26.9 billion resulting from Chinese imports.

“It’s basically increasing,” said Representative Sander Levin, a Michigan Democrat and the senior member on the House Ways and Means Committee. “And there’s very much a need to make sure China lives up to its WTO obligations. It’s important for manufacturing, it’s important for the renewables. It’s important for our competition.”

While Rob Portman, a Republican Senator from Ohio, said the trade unit was a good idea, others questioned the timing of the proposals, coming in an election year with unemployment of more than 8 percent.

Derek Scissors, a research fellow on Asia economic policy at the Heritage Foundation said in a conference call following the speech,“Going into four years of policy, did you just discover that you need a new unit? Because of the inconsistencies, it looks like it is political.”

To contact the reporter on this story: William McQuillen in Washington at bmcquillen@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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