Wal-mart Hearts China

Frontline: is Wal-mart good for America -- Interviews with economist Alan Tonelson:

"Most people are thinking that Wal-Mart is good for America. I think you're saying that Wal-Mart is not good for America.

That's right.

Why isn't Wal-Mart good for America?

... Wal-Mart, in my view, hasn't been good for the American economy because even though it's offering more and more people lower and lower prices, by encouraging job flight, it's helping to drive down the wage level of the entire American workforce. And as the wage level falls, Americans become less and less able to pay for products, however low the prices are, in a responsible way. Their only choice is to go deeper and deeper into debt.

And what about the country?

The country goes deeper and deeper into debt as well, and the country is encouraged to import from countries like China much more than it can possibly export. Wal-Mart alone imported an estimated $15 billion worth of goods from China in the year 2003. That's about one-tenth of all the goods that the entire U.S. economy imported from China that year."

-snip-

So you're saying that we're not seeing a level playing field in our trade with China. Is that right?

We're not seeing a level playing field with our trade with China at all. And one big reason is that the Chinese government massively subsidizes industry. Industrial development, which creates jobs that China desperately needs, is a very high priority for the Chinese government, and they're willing to pay a lot of money to make sure that that happens.

What do they do? How do they subsidize their own industry?

They subsidize land costs. They forgive taxes. They subsidize fuel costs, and they also give a subsidy when you export. We don't subsidize exports at all. We don't subsidize production. The Chinese not only subsidize production; on top of that, they subsidize exports, because again, exports create jobs, and the Chinese government desperately needs to create jobs if it's to remain in control. And as a result, there is anything but a level playing field between the U.S. and China.

In addition, China routinely breaks the terms of the trade agreements that it signs with this nation. For example, most of the subsidies that China provides to manufacturers in China, whether they are U.S.- or Chinese-owned, it doesn't matter, you get a subsidy. Most of the subsidies are illegal under world trade law, under the set of rules that the world's trading countries have developed since the end of World War II to make sure that trade can proceed efficiently and profitably for everyone.

China routinely breaks trade agreements and trade rules. The United States government, though, doesn't do much about this. Why not? Because many of the companies that benefit from the breaking of Chinese trade rules are U.S. companies that produce in China. If you produce in China, you benefit from China's breaking of the trade rules. These multinationals are extremely powerful in Washington, and they have told the U.S. government: "Don't enforce the trade agreements. We'll get hurt."

-snip-

So what do we do as a nation to deal with this mess?

We have to recognize that our trade and manufacturing crisis has become so grave that we have no choice but to start thinking seriously about restricting trade in various ways. It's a shame that it's reached this point, but we're there. And by postponing the decision to start imposing tariffs on goods coming into this country, we will only be sure that the problem gets worse and worse, and that the medicine we eventually have to take will be harsher and harsher.

We also have to seriously renegotiate lots of the misguided trade agreements that we have reached, including our membership in the World Trade Organization, which is basically made up of 150 countries that have an overwhelming interest in keeping the U.S. market much wider open to their goods than [their] markets are open to our goods, because despite 10 years or 12 years of breakneck globalization, where the globalization supporters have gotten everything that they wanted, almost no country in the world has figured out how to grow other than exporting to the United States.

The only country that is growing strongly that's not exporting to the United States is the United States. Everybody else depends on us, and the World Trade Organization's politics are very profoundly shaped by that imperative. It's turned into an anti-American kangaroo court. We need to either make sure that the structure is changed completely, or we need to get out and deal with these trade problems as they come up one by one, using our market power -- which is enormous, because everybody has to sell here if they are to prosper -- to set equitable terms of trade for American workers and for U.S. companies, companies that make their products here.

[How will the consumer be affected by trade restrictions?]

... There is no question that trade restrictions are going to exact a short-term economic cost. There is no way to bring the economy back into a balance without some kind of an austerity program. The longer we wait to impose this, the more austerity we'll have to experience. And if we are nervous or dead set against trade restrictions, we have to understand that once we lose the ability to import because our living standards have sunk so low, trade is going to be restricted anyway, but the trade restrictions are going to be imposed by foreigners. ...