Guest Editorial, Rep. Duncan Hunter: The Loss of the U.S. 'Arsenal of Democracy' to China's Unfair Trade Regime Needs to Be Addressed

Targeted News Service, Jan 23, 2007

The presidential campaign of Rep. Duncan Hunter, R-Calif., issued the following statement:

When we got into World War II, our allies and our adversaries realized very quickly that America had an arsenal of democracy. We had a great industrial base. We had an industrial base in which our major automakers were able to turn immediately to making tanks and personnel carriers and all the other equipment of war.

In my own home town in San Diego, we had a facility you can still see if you drive down by the harbor that used to turn out a bomber aircraft every 60 minutes. They could have built the entire B-2 force in one day and had three hours left over.

Everywhere across this land we had a strong industrial base, which was transformed into a wartime footing. It was with the support of that industrial base that the armies of the United States moved across Europe, that the Marine Corps and the armies moved across the Pacific, and that we brought this war to a conclusion that favored the United States of America. An arsenal of democracy is pretty important to democracies.

Today, if you want to look at a big part of the arsenal of democracy, you may have to go to some other countries. One country you may have to go to is China, because China is cheating on trade and China is acquiring hundreds of billions of American dollars more than we are acquiring from them. They are using those billions of American trade dollars to buy military equipment.

That is why they are able to have some 17 submarines under production today while we have a fraction of that. That is why they are able to buy and build medium-range ballistic missiles. I predict that at some point those ballistic missiles will have an anti-ship capability that will present a major threat to the American fleet. That is why they are able to start developing a new industrial base for the development of a modern tactical aircraft program.

We see this one-way street on trade beginning to move the arsenal of democracy offshore. In the past year on the Armed Services Committee I have looked at certain critical components of the arsenal of democracy and I note that we only have one carbon fiber manufacturer left in the United States. We only have one rocket fuel manufacturer left in the United States.

As we look at more and more of the industries that are critical to national security, we realize that in many of them we only have one or two or three businesses or companies left that are capable of making particular components that are critical to America's military strength.

It is time to change and reverse this one-way-street trade policy that we have acquiesced to and restore the arsenal of democracy.

Since we are all talking football at this time of the year, when China enters a trade deal with the United States or competes against an American company they start with 74 points on the scoreboard before the opening kickoff.

They give a 17 percent refund of their VAT tax, basically a 17 percent subsidy to exporters sending products to the United States. When our products arrive at China's shores, they give us a 17 percent penalty. That is a 34-point spread. Then just to make sure that we don't throw a Hail Mary and come from behind and win that particular competition on that particular product, they devalue their currency by 40 percent, and increase the spread to 74 points.

That means that before the opening kickoff in this competition that we call world trade between the Chinese corporation and the American business and American workers, China has 74 points on the scoreboard. Then if we lose the competition, they say, what's the matter? Can't you play football?

China is cheating on trade. The Chairman of the Federal Reserve Board made that clear in his preliminary speech which called this manipulation of currency an illegal subsidy. That word "subsidy" was subsequently removed from the speech before it was given to the Chinese leadership, but that illegal subsidy -- that 74 points on the scoreboard -- hurts American businesses, it hurts American workers and it erodes the arsenal of democracy.

We are going to need the arsenal of democracy at some point in the future. We need to have a trade policy and new trade laws that say this: We are not going to live with the 74-point disparity any more. You can do it the easy way or the hard way. We can all start with zero points on the scoreboard, or we will put the same taxes on your goods that you put on ours, and we will both start with 74 points on the scoreboard. But we are not going to start anymore with the score being America zero, China 74.

I hope this is a year in which we pass a bill that calls the currency manipulation and devaluation by the central government of China what it is: an illegal subsidy.