In our opinion: Editorial: A good trade move

Published: Tuesday, April 3 2012 12:00 a.m. MDT

In this photo taken on Nov. 10, 2011 and released by China's Xinhua News Agency, a worker fixes a solar panel at a factory in Qingdao, east China's Shandong Province.

Associated Press

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It would be odd to find a policy in which Republican presidential candidates appear more aligned with the Democratically controlled Senate and President Barack Obama appears more in harmony with the Republican controlled House of Representatives. But trade policy with China appears to be just such an issue.

Republican presidential hopeful Mitt Romney frequently accuses China of currency manipulation. As long as he is a candidate, that charge makes for good campaign rhetoric. But were he president, that same charge — made formally through his Treasury Secretary — would lay the legal groundwork for imposing stiff tariffs on Chinese imports.

In this regard, Romney is lock step with the Democratically controlled Senate that has passed legislation asking for essentially the same thing.

The Senate's legislation, however, has stalled in the House because free-trade Republicans are wary of starting a trade war with China. Interestingly, this is the concern shared by Obama who, like his Republican and Democratic predecessors in the White House, has been loath to name formally any country a currency manipulator.

Nonetheless, the Obama administration has responsibly engaged the fairness of China's trade policies in recent weeks. In early March, the president announced that the United States had joined with the European Union and Japan in filing a trade action against China at the World Trade Organization. The countries seek a reversal of China's export limits on rare earths.

Rare earths, also known as lanthanides, are critical elements in the miniaturization and manufacture of modern electronics. It so happens that China has cornered the market on the mining and production of rare earths. By limiting their export, China can essentially command that cutting-edge electronic manufacturing take place in China.

A week after announcing the WTO action on rare earths, the Obama administration slapped tariffs on solar panels imported from China. Since the 1990s, America's share of the solar panel market has dwindled from about 40 percent to 7 percent. The supply of low-cost Chinese solar panels has lowered the price of solar energy by two-thirds in the last four years. As a result, American imports of Chinese solar panels rose from $21.3 million in 2005 to $2.65 billion last year, and at least three American solar panel firms — most notably Solyndra — declared bankruptcy last year.

So, is the Obama administration beating the trade war drums? Hardly. It is entirely reasonable for the U.S. to respond to China's cynical manipulation of strategic rare earth supplies, and by making its response in concert with other developed nations at the WTO, the international agency specifically created to help resolve this kind of issue, the U.S. has acted with extraordinary restraint.

And while we don't love the unilateral imposition of tariffs on solar panels, products that are self-evidently lowering the cost of energy for consumers while benefitting the environment, the measured 2.9 percent to 4.7 percent duties that have been imposed will hardly grind the trade to a halt. Indeed, share prices for the leading Chinese solar panel manufacturers jumped on the news of the tariffs because investors had already priced much higher duties into their expectations.

The U.S. consumer enjoys enormous cost savings from our massive China trade. Our leaders, however, are wise to be wary of China's intentions. There is evidence that some in China view trade as an opportunity for geopolitical gain rater than mutually advantageous commerce. But for the moment, we believe that the watchwords in this relationship should be skepticism, prudence and process, rather than belligerence. The House of Representatives and the White House seem to agree.

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