WASHINGTON, D.C. –U.S. Sen. Sherrod Brown (D-OH) today delivered remarks to the U.S. China Economic and Security Review Commission at an event entitled “China’s Industrial Policy and its Impact on U.S. Companies, Workers and the Economy.” A copy of Brown’s statement, as prepared for delivery, follows.

Commissioner Mulloy, Commissioner Slane, and fellow Commissioners, thank you for inviting me to speak today.

I have testified before this panel several times through the years. Never before has the urgent need for action been more apparent to me. The current financial crisis paints our economic relationship with China in broad relief. Our economies are not healthy, and worse, they are co-dependent.

The United States official unemployment rate is 8.1 percent, and in my state of Ohio, it is 9.4 percent – the highest rate in 25 years. Meanwhile, tens of thousands of factories in China have closed over the past six months. China is one enormous export platform and the United States, its biggest customer, has stopped buying.

Morgan Stanley economists report that exports account for 47 percent of the economies of China and other East Asian nations, while in the United States, consumption accounts for more than 70 percent of our GDP. This economic co-dependency has bred a dangerously skewed financial relationship.  As revenues flow into China and out of the United States, China has become our biggest lender.  I don’t need to detail the risks this relationship breeds, but its roots lie in our economic codependency, and our economic co-dependency is rooted in our nation’s passive trade policy.
 
Ohio is one of the great manufacturing states in this country. We make paper, steel, aluminum, glass, cars, tires, solar panels, polymers, wind turbines, and more. Look around you today, and I’m sure you will find something you use that is made in Ohio.

Let’s look at a typical Ohio manufacturer and compare him with a Chinese manufacturer.

The Ohio manufacturer has a minimum wage to pay his workers. He has clean air and workplace and product safety standards by which to abide, helping to keep his workers healthy and productive and his customers safe. The Chinese manufacturer has no minimum wage to maintain and is allowed to pollute the local water sources and let workers use dangerous and faulty machinery.

The Ohio manufacturer pays taxes, health benefits, and social security. He typically allows family leave and gives WARN notices when there is a plant closing. The Chinese manufacturer often allows child labor.

The Ohio manufacturer receives no government subsidies, and the Chinese manufacturer often receives subsidies for the development of new technologies, or for export assistance. The Chinese manufacturer benefits from China’s manipulation of its currency, which gives up to a 40 percent cost advantage.

The Ohio manufacturer is going green and investing in new technologies and efficiencies to create more sustainable production practices. Ohio manufacturers are part of the movement to become more energy efficient. They will do their part to reduce carbon emissions but not at the expense of jobs if China and other countries do not take comparable action.

Now, when the Ohio manufacturer petitions for relief, when he says, “I can compete with anyone, but this is not a level playing field.” Or, when the Ohio manufacturer says he wants “to emit less carbon but needs to see that his competitors from China bear the same costs on similar timelines,” what does the Chinese government say? They call it “protectionism.”

Just last week, Energy Secretary Chu noted in a hearing that unless other countries also bear a cost for carbon emissions, the United States will be at a disadvantage. The response from a Chinese official? He said “I will oppose using climate change as an excuse to practice protectionism on trade.” Chinese officials are quick to call the United States protectionist, despite all of the protections it affords its manufacturers. Meanwhile, the United States has the world’s most open economy.

And, of course, the Chinese officials are often joined by multinational CEOs, Ivy League economists, and editorial boards in calling any efforts to rebuild American manufacturing “protectionist.”

That is why I feel a sense of urgency with the hearing you are holding today.

China’s industrial policy is based on unfair trade practices. It involves direct export subsidies, indirect subsidies like currency manipulation and copyright piracy, and hidden subsidies like lax standards and low labor costs. In total, it results in the loss of millions of American jobs.

It is also depressing wage and income levels worldwide, while China’s exploitation of environmental and health and safety standards is killing Chinese workers and citizens, and adding to our climate change challenges.
The health of our economy and strength of our middle class depend on how Congress and the Obama administration engage with China on these issues.

Thank you for investigating these issues today, and for the opportunity to contribute my views.

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