Let's break our dependence on China

Our out-of-control trade deficit with China underscores a glaring failure to address Beijing's blatant currency manipulation, its disregard for intellectual property rights and its dumping and counterfeiting of manufactured goods.

But there is a new concern: China's increased military belligerence.

The U.S. trade deficit with China in 2010 was a whopping $252 billion, the largest in the world between any two countries. The United States exported $82 billion in goods and services to China (double its 2005 exports) while it imported more than $334 billion worth (second only to 2006 levels). China is able to produce low-cost goods Americans want for two main reasons: a lower standard of living, which allows them to pay lower wages to workers, and an exchange rate that is set to always value its currency lower than the dollar.

Democrats and Republicans in Washington are beginning to understand that U.S. companies cannot compete with cheap Chinese goods. They must either reduce their costs or go out of business. And to reduce their costs, many companies are outsourcing, relocating to foreign countries or simply laying off workers, adding to the U.S. jobless rate.

Layoffs have transformed the United States in recent years. Author Louis Uchitelle, who wrote "The Disposable American: Layoffs and Their Consequences," says each layoff is "the great American wound in triplicate."

"It hollows out companies so they can't compete. It hollows out the country by removing middle-class jobs. It hollows out the middle-class employees who are laid off and too often drop permanently into a demeaning, low-wage way of life."

Indeed, ending the alarming trade deficit with China is becoming a matter of national security.

China is now the largest lender to the U.S. government. In November, China owned $895 billion in U.S. treasury debt, 32 percent of the total $2.8 trillion outstanding. This gives Beijing growing political leverage over the United States, because it theoretically could call in its loan.

Consider, too, for the first time since the communists took over China, that they are flexing their military muscles while pursuing territorial expansion in Asia.

Last year, China bullied Japan over the Senkaku Islands administered by our ally, but claimed by China. Beijing escalated an incident involving the ramming of a Japanese patrol boat by one of its trawlers, demanding Japan apologize. When Japan initially refused, Beijing threatened to cut off its supply of "rare earth" minerals, which are vital to the production of everything from missiles to computers. Japan caved in.

The trawler affair is a reminder that, through its predatory trading, China has killed its American competition and has almost established a global "rare earth" monopoly.

None of these Asian territorial disputes directly affect us, but when Defense Secretary Robert Gates met with Chinese President Hu Jintao in early January, China insulted us by deliberately launching its first stealth jet fighter test that very day. China senses the United States is getting weaker economically and, as a result, we will be less able to project our military power worldwide (especially with regard to the pro-U.S. island of Taiwan, which China has long vowed to seize, by force if necessary).

China's thirst for oil also grows unabated. China and the United States compete for international energy sources. In Latin America, the Chinese have concluded energy deals while the United States is being stymied -- especially by Venezuela's anti-American demagogue, Hugo Chavez.

I've been visiting Africa for 15 years. While America often seems to write off Africa, the Chinese continue to establish a bigger and bigger footprint. Why? Because of Africa's vast oil reserves. America ignores these African reserves at its own peril.

Yes, the United States might be less affluent today without Chinese goods and markets. Four decades of engagement have produced some positives for both countries. But we cannot allow an out-of-control trade deficit to continue with this trading partner.

We can't ignore its bellicose behavior. We cannot condone its brazen cyberattack on Google, nor its terrible human rights policies and especially its shameless currency manipulation and trade cheating.

It has gotten much worse since I left Congress in 2002.

Hopefully, it is dawning on both the Congress and the Obama administration that our nation must never become totally dependent on a country for loans to finance our massive trade and budget deficits, or for rare earth elements vital to our industries.

Our nation therefore must implement and pursue policies to restore our economic independence. As Sen. Phil Gramm of Texas used to say, "If the lion and the lamb have to lay together, you want to make sure you are the lion." Concerning our relationship with China, we are continually being forced into the role of the lamb.

J.C. Watts (JCWatts01@jcwatts.com) is chairman of J.C. Watts Companies, a business consulting group. He is former chairman of the Republican Conference of the U.S. House, where he served as an Oklahoma representative from 1995 to 2002. He writes twice monthly for the Review-Journal.