2011 report to congress - U.S.-China Economic and Security Review ...

dkrause on DSKHT7XVN1PROD with $$_JOB363ADDITIONAL VIEWS OF COMMISSIONERSROBIN CLEVELAND AND WILLIAM A. REINSCHThe Commission’s report provides a frank assessment of China’seconomic and political policies designed to protect the CommunistParty’s agenda of stability, growth and self-preservation. U.S. andEuropean policy makers and investors have expressed well foundedconcern about China’s increasing efforts to protect and promote domesticindustries by relying on market barriers, pressure to transfertechnology, and capital control policies. Notwithstanding theseconcerns, US foreign direct investment continues to grow year onyear as China continues to be viewed as a key market opportunity.As noted in the report, US economic growth and export strengthrelies on the production of advanced technology and equipment includingaircraft, medical and scientific equipment and energy relatedmachinery. Since 2004, China has captured a larger share ofthe advanced technology market as evidenced by the fact that USimports of Chinese advanced technology exceeded $10 billion, whileAmerican exports fell slightly under $2 billion. While troubling, notall of this trade imbalance can be explained by China’s aggressivemix of corporate subsidies, tax incentives, protectionism and industrialpolicy as the report might lead any reader to conclude.In briefings and conversations with American corporate leaders,opportunity in China is viewed both in terms of ‘‘pull’’ and ‘‘push’’.The pull is obvious; the Chinese attract direct investment with variouscommercial incentives and the prospect of market opportunities.What the report fails to discuss are the reasons US companiesfeel pushed to move productive capacity to China. For example, intwo sections in the report, GE is singled out for its decision to establisha joint venture in integrated modular avionics with theAviation Industry Corporation of China. While several other companiesare involved in similar aviation related joint ventures, thereport irresponsibly relies on anonymous sources from press accountsto make a case that there are unique risks of diversion ofGE’s civilian technology for Chinese military purposes, notwithstandingthe fact that the US government approved the transaction.As is the case with much of the report, the Commission’semphasis on China’s aggressive acquisitive strategy and pursuit ofsecurity interests has the effect of presenting US companies in theunfair light of appearing to facilitate Chinese goals. The reportfails to discuss key elements of business decisions GE and othercompanies have offered as reasons they are pushed to move productionand jobs overseas.In both hearings and meetings, witnesses have cited increasingand excessive US regulation and onerous tax burdens as among theprincipal business-based reasons for moving abroad. While theCommission views its primary responsibility as serving the Congressby evaluating China’s security and economic policies andtheir impact on the United States, that focus, unfortunately, onlyprovides a partial accounting of the reasons for our significanttrade imbalances and weakening manufacturing base. CriticizingUS companies for making business based decisions to prosper anddrawing attention to China’s aggressive and often unfair policiesand practices alone will not reverse the dangerous trends in US–VerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00375 Fmt 6602 Sfmt 6602 G:\GSDD\USCC\2011\067464.XXX 067464