“Trust comes not from a particular technique, but from the character of the leader.” —Professor Warren Bennis, University of Southern California, “On Becoming a Leader”
Let's consider, for a moment, the nature of our political leadership when it comes to the well-being of manufacturing, in general, and the China currency question, in particular.
All of us in the industrial metals supply chain, from operators of bauxite and iron ore mines through distributors, first-stage fabricators and their customers, understand how essential it is to maintain a strong, innovative and vibrant manufacturing sector in North America. As a subset of that concern, few issues affect our ability to compete with our Chinese rivals as that nation's long-time policy of undervaluing its currency, thus making Chinese goods much cheaper on world markets.
The Bush administration was profoundly unwilling to confront China on these issues. Time after time, Bush-era treasury secretaries refused to identify China as a currency manipulator, and Bush cabinet members rebuffed petitions for redress for the industrial harm caused by the undervalued yuan. Not to say no trade disputes with China arose during the Bush years; they did. But when the well-being of manufacturing was at stake, and when currency was brought to that administration as the specific trade issue, Bush officials consistently ignored the complaints.
All of us had reason to believe that the Obama administration would be different. As a U.S. senator, President Obama co-sponsored the China currency legislation that our trade association has supported for nearly a decade. That legislation, incidentally, has been improved with every new Congress, is fully compliant with World Trade Organization (WTO) rules, and provides abundant time for both sides to negotiate currency questions while making clear that currency manipulation is the equivalent of an illegal trade subsidy actionable under U.S. trade law.
Now, just like President Bush, President Obama has not supported the Currency Reform for Fair Trade Act. His treasury department has described how China manipulates its currency and why it should stop, yet it refuses to say that China has mercantilist policies that violate its WTO accession agreement and trade law.
Despite widespread bi-partisan support for the last eight years and recent Democratic majorities in Congress, the bill never emerged from committee until last September. That's when the House, worried about how to gain support from states that, in the aggregate, have lost hundreds of thousands of manufacturing jobs, actually passed the bill — but only when it served an immediate political purpose, and only when the House leadership knew that the Senate leadership would not act on it. By “Senate leadership,” we include New York Sen. Charles Schumer, who has made a partial career of late denouncing China politically, while doing next to nothing when it comes time to vote.
Even in the best of times, politicians are frustrating individually and as a group. But what's emerged over the years is a certainty. And that certainty is that the well-being of manufacturing is of interest only when it serves a short-term political advantage. China's currency manipulation, apparently, must be tolerated by presidents, senators and representatives who make a big show of complaining about it, but who then let the issue drop.
Clearly, other factors are at work in this struggle. Perhaps it's our need for China's support against North Korea and its nuclear ambitions. Perhaps we're constrained by the huge amount of U.S. debt held by China. Perhaps it's because of the political influence and campaign contributions of retailers, and their suppliers, who depend on cheap Chinese merchandise.
Whatever the case, it's time for our leaders to come clean about our relationship with China and stop playing the American people as hapless dupes in this debate. As Professor Bennis suggests, we trust leaders of character who do what they say they will. In this instance, we have yet to see the first political leader whose actions have spoken louder than their words.