U.S. versus China: Time to get it on

September 18, 2008
By: Dan Davis

The Olympics are over, so it"s time to turn our attention to a more recent favorite pastime—China bashing.

The best part of this activity is everyone can participate. Sure the Democrats have driven this point home in
battleground states, such as Michigan and Ohio, where local citizens worry that all manufacturing jobs eventually will head overseas. The Democrats, if elected, are going to get tough and straighten out trade issues with our main supplier of affordable electronics and funny plastic things that sell for a $1.

And don"t forget the Republicans. They usually stand on the side of free trade, but they want to be seen as defenders of fair trade. They may be getting some help from the outgoing administration.

Financial Times reported earlier this month that the U.S. is prepared to file a case against China at the
World Trade Organization (WTO) claiming the Chinese government"s export quotas and taxes on raw materials used in steel making help to inflate global prices and deflate domestic prices. European governments have gone after China
on this same issue and have witnessed some success.

Expect the case to be pushed in the coming days, particularly as the presidential election heats up down the
stretch. What better way for the GOP to prove that their party is not afraid of confronting China on trade issues
than by pointing to a trade complaint filed by U.S. trade officials? (In actuality, China is already busy fighting another complaint about taxing imported automotive parts.)

Chris Kuehl, managing director, Armada Corporate Intelligence, and economic analyst, Fabricators & Manufacturers Association, reported in his electronic newsletter that he believes the U.S. and China will be involved in a series of escalating trade battles in the coming years. Treasury Secretary Hank Paulson tried to engage in quiet diplomacy, Kuehl wrote on Sept. 5, but that has led to little overall change in China"s approach to following WTO rules.

It shouldn"t come as any surprise that this is happening now. China got its moment in the sun with the Olympics—complete with those tiny little gymnasts grabbing gold and the 1 million-strong synchronized drum
team that appeared during the opening ceremonies. The U.S. got a gold-medal swimming stud and the worst host in
Saturday Night Live history. Time to get back to old-school hatin".

Meanwhile, China still owns an overwhelming part of the U.S. national debt—right around $9.6 trillion and
growing every day. This certainly will influence which battles U.S. trade officials pick. They need to win; they
can"t afford to lose.

Dan Davis

Dan Davis

FMA Communications Inc.
2135 Point Blvd
Elgin, IL 60123
Phone: 815-227-8281