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What Happened in Greece ...

Didn't stay in Greece.

12:00 AM, Jun 19, 2010 • By IRWIN M. STELZER
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When Obama arrives in Toronto for this week’s G20 meeting he will be under pressure to kick some asses that don’t belong to BP executives. For adding to congressional pressure to get the Chinese to ease the currency peg is new heat from American businesses that previously felt it would be best to allow the Chinese to move at their own pace. That was then, and this is now. Many leading members of the business community have had enough, and are backing an investigation by the International Trade Commission into China’s theft of intellectual property, and its procurement practices.

 For one thing, China is attempting to force American firms to set up factories in China by limiting exports of needed minerals. For another, the Chinese regime is responding to lobbyists for state-owned companies by requiring local procurement officials to give preference to products that incorporate “indigenous innovation,” and is telling American firms that want to tap its markets that they must first share their intellectual property with Chinese manufacturers. If the Americans refuse, so be it: China has no need for foreign investment capital. Having cornered the U.S. market for many labor-intensive goods, the Chinese leaders are deploying a variety of  protectionist measures to enable local manufacturers to move up the value scale.

Unfortunately for the president, the derrieres on which he is being urged to implant his footprint is the one on which his largest creditor sits. Obama is running staggering deficits, and is planning to increase spending on a second stimulus and on his new energy program. If China stops buying his IOUs or, worse, starts selling some U.S. Treasury notes, interest rates will rise and any hopes of a robust pre-election recovery in the jobs market will fade. 

If the president can’t persuade his largest creditor to reverse its protectionist course, he will have to concede to the growing protectionist clamor from Congress. Geithner admits that congressional demands to force China’s hands are “overwhelmingly strong [and] bipartisan.” Sander Levin, the Democrat who is acting chairman of the House Ways and Means Committee (in the absence of ethically challenged Charlie Rangel), says that if the president does not get the Chinese to change their trade policy at next week’s G20 meeting, “Congress will act.”

Talk of a high-level U.S.-China Strategic and Economic Dialogue to increase Sino-American cooperation just won’t do. Neither will the hints by Chinese president Hu Jintao at last month’s meeting with Geithner that he will reform his nation’s exchange rate policy -- some day. The current cold war over trade just might be heating up.

What happened in Greece ... didn’t stay in Greece.   

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