Changing global economy hurts Central Jersey businesses

By: George Spohr
   Business trends in far-flung markets in China, Europe and the Middle East are having harmful repercussions for Central Jersey businesses.
   That was the message delivered by William Hawkins, a senior fellow at the Washington, D.C.-based U.S. Business & Industry Council, during a recent swing through Princeton.
   There’s a "competition between powers" between China’s emerging economy and the U.S. economy, which — he said — has been operating at a disadvantage since the 1990s.
   It was then that Asian economies collapsed and the United States made trade concessions to stabilize the situation. While Asian economies have recovered, the United States still operates under those trade concessions, and that makes it harder for Central Jersey exporters to remain competitive.
   While Europe’s Euro currency is trampling the dollar’s value, Mr. Hawkins said that’s not cause for alarm.
   "Europe is past its prime," he said, calling the continent a place where "growth is not a priority, but leisure is a priority. They’re a slower-growth economy, a little technophobic. They’re not funding research as much as we are. They’ve let that deteriorate some."
   The declining value of the U.S. dollar might actually help U.S. manufacturers, he said, as the cost of shifting production overseas begins to soar. The dollar’s lost 15 to 20 percent of its value in recent years. But that shift to domestic production isn’t happening quickly enough, he lamented.
   "I think it’s going to take more than passively waiting for the dollar to collapse," he said, proposing a freeze on new trade agreements, United States withdrawal from the World Trade Organization and new tariffs on Asian countries.
   He said the global business scene is woven with threads that hurt Central Jersey businesses, such as OPEC considering a different currency in pricing oil. Currently, oil is priced in U.S. dollars. That provides businesses here with some stability.
   But because the dollar is worth less now, the "price of oil is just unsustainable," Mr. Hawkins said. "It’s double what used to be an acceptable level."
   He also said that the United States is operating with previously unheard-of trade deficits, such as a 6-to-1 trade deficit with China — where for every $6 worth of Chinese goods American consumers buy, Chinese consumers buy $1 worth of American goods.
   "We sell them virtually nothing," he said. "They want capital. They want technology. They want training. They want raw materials — oil, steel, any components. American companies know the future of China’s market is based on making things in China to sell in China," as opposed to exporting American-made goods.
   He said the United States is in a good position to demand trade concessions from China. "We’ve got leverage on China, because they need our market."
Bill could help local firms
   A new, bipartisan bill introduced in the U.S. House of Representatives would give locally based domestic manufacturers the direct ability to combat Asian currency manipulation
   The Hunter-Ryan bill, dubbed H.R. 1498 and named for its sponsors, Congressmen Duncan Hunter (R-Calif.) and Tim Ryan (D-Ohio) is "the premier ‘fair trade’ bill of the 109th Congress," said Kevin L. Kearns, president of the United States Business and Industry Council.
   The congressmen "have demonstrated courageous political leadership on behalf of small- and medium-sized domestic manufacturers with their work on the currency issue," he added. "We hope that H.R. 1498 can lead to sanctions on currency manipulators, put a stop to foreign government manipulation of currency markets and lead to appropriate exchange rates. If not, passage of H.R. 1498 will allow domestic American manufacturers the redress they deserve.
   The administration has been negotiating with the Chinese government for more than two years in an effort to get China to value its currency fairly, but to no effect, he said.
   "The Treasury secretary has issued numerous semi-annual reports to Congress on international economic and exchange rate policies that have refused to cite China, Japan, and Korea for manipulating their currencies," said Mr. Kearns. "The Hunter-Ryan bill will allow domestic American manufacturers to do for themselves what the executive cannot seem to bring itself to do."
   From 1988 to 1994, the Treasury Department found China to be violating the 1988 Trade Act’s currency manipulation provisions five times. Taiwan was found to be manipulating four times and Korea was found to be manipulating its currency three times. Since 1994, neither the Clinton nor Bush administrations have applied the 1988 Trade Act as intended by Congress.
   "It is high time for the secretary of the Treasury to cite Japan, China, Taiwan and Korea in the upcoming semi-annual report to Congress," Mr. Kearns said.
   "If American domestic manufacturing is to survive, China cannot be allowed to continue its currency manipulation," he continued. "Given the current astronomical trade deficit with China and its blatant history of currency manipulation and unfair trade practices, no member of Congress has an excuse not to join Chairman Hunter and Congressman Ryan on their bill and thus support domestic American manufacturers."