Obama Targets China With Enforcement Group Aimed at Unfair Trade Practices

President Barack Obama vowed to get tough on unfair trade practices by nations such as China, and said the U.S. should give aid to help domestic companies compete.

Obama is creating a new trade enforcement group that would use investigators and other federal resources to combat unfair trade practices in nations including China, according to a White House briefing document released before the State of the Union speech tonight. Obama also is seeking a program to provide credit to companies competing against foreign counterparts that benefit from preferential credit from their governments.

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

Obama called on Congress to approve tax cuts for U.S. manufacturers, increased deductions for making products in the U.S., and financing assistance for new plants, equipment and training.

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.

SolarWorld AG’s U.S. unit said the solar-energy industry is being hurt by China’s cash grants, discounts on raw materials, preferential loans and tax incentives. China also provided $30 billion in credit to its biggest solar manufacturers in 2010, about 20 times the U.S. effort, Jonathan Silver, then-executive director of the Energy Department’s loan program, told a congressional panel Sept. 14.

‘Long Overdue’

“It’s long overdue,” Scott Paul, the executive director for the Alliance for American Manufacturing, said today 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.”

China, the second-largest U.S. trading partner, has become a target of Republican presidential candidates who blame its policies for higher U.S. unemployment. Republicans are pushing the administration to label China as a currency manipulator.

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.

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.

Currency Undervalued

The U.S. Treasury Department said Dec. 27 in its twice- yearly report on global currencies that China’s yuan is substantially undervalued and the U.S. will “press for policy changes that yield greater exchange-rate flexibility.”

“The Obama administration has to be very careful in its pivot toward Asia so as to not be seen as too threatening to China at the same time as sending a clear message to Beijing that it will not tolerate provocation in the region,” said Bryce Wakefield, Asia program associate at the Woodrow Wilson International Center for Scholars in Washington.

Focusing on trade is part of the president’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.”

The U.S. had a $47.8 billion trade deficit in November, with $26.9 billion resulting from Chinese imports. The U.S. aims to reduce the trade deficit through three new free trade agreements with South Korea, Colombia, and Panama that were approved in October.

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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