Media Highlights 2007

2008

Dan Ikenson discusses US-China talks in Beijing on CNBC.
December 13, 2007.

CNBC Host: "A lot of eyes are focused all away around the world right now on China. China and the US have decided to step up on food and product safety. This is according to the strategic economic dialogue by treasure secretary Hank Paulson. Last week on Street Signs, he told us the number one job is product safety. Also today, China threatened to retaliate if Congress tries to block imports from China. Let us go through the report card of what Hank Paulson has said for Food and Product safety. Joining us today is Dan Ikenson, Associate Director for the Trade Policy studies at Cato Institute. Scott Paul, director of the Alliance for American Manufacturing.

"How would you rank the United States progress on food and product safety so far?"
Scott Paul: "I'd hate to give it a grade because I think I would have to fail it, but the agreement they announced covers ten products, its very narrow, its relying on access of getting US inspectors in China. As everyone knows the data in China’s system is very opaque. I don’t think there is any guarantee for the US consumer that they can expect the breath of products. This doesn’t include food; it includes toothpaste, tires, and structural steel and all sorts of things. This only covers tiny problems. I don’t think US consumers should assume that Chinese products are safe to consume."

CNBC Host: "Dan, I don’t think Hank Paulson is used to getting F’s on any of his report cards. So can we concur that is what he deserves on this front?"
Dan Ikenson: "I don’t think so. I think there is some progress being made on the product safety front. China is a developing country, the regulations they have, have been in place forever, and have not been up to snuff. Ultimately though, it is American consumers who will render the verdict here. We have the holiday shopping season now. Next month we will know whether Americans continue to buy Chinese toys etc. I think that this is less an issue for government to government dialogue then some of the other issues that are before this dialogue."

CNBC Host: "It is interesting, Dan, that some of corporate America is echoing what you are saying, in the majority of the companies out there say they are very satisfied with the Chinese suppliers. It perhaps to seem a more wide spread problem then people would like it to be, but not ubiquitous failure on safety over there."
Dan Ikenson: "Right. I think it is a case-by-case basis. It’s in the interest of American companies to have their brand protected, to make sure their business is with suppliers that are above board. Likewise it is in the interest of Chinese factories and producers to make sure they are abiding by all regulations above board. They need to get Mattel’s businesses as well."
Scott Paul: "We are only able to inspect only one out of every one hundred imports coming in from China. The volume is extraordinary, these companies are relying on China’s word for it, and we’ve seen time after time in the last six months. It is not just toys, there are products that can actually poison people that are coming into our country. We are not saying that we shouldn’t have imports, but we do think that some sort of free trade philosophy shouldn’t stand in the way of consumer safety. That has got to be our biggest priority here. I’m afraid it is getting pushed aside for the sake of getting fast imports in."

CNBC Host: "Alright, so obviously more to come on this, but I want to get on to the other issue here. That is allowing China’s currency to float freely on global markets. Are we moving in the right direction? What would you rank Hank on that?"
Dan Ikenson: "I think that he is making good progress. What is noteworthy here is we don’t see the political theatrics. They have been on the side line. Congress has been pretty quit. If you recall the first 2 SED dialogues, Congress was presenting this as a Paulson approach versus a Congress get tough approach. I think Congress recognizes now that China doesn’t respond well to public criticism. The Yuan has appreciated to 12% since it was pegged to a basket of currencies. But the bi-lateral deficit has gone up about 68% since then. So I think Paulson is right when he recognizes that the trade deficit is not necessarily a function of currency or trade policy, but a structural issue. On that front, he has been working with the Chinese to get financial, health, and disability insurance and credit cards in the hands of Chinese people to help them spend."

CNBC Host: "Scott, Dan I appreciate you being with us. Just a little food for thought, if China revalues, the prices are going to go up here."

Dan Griswold: "There are two powerful economic and demographic trends, two very positive ones, that are driving low-skilled immigration to the United States. On the demand side, our economy continues to create hundreds of thousands of net new jobs every year for low-skilled workers in fields like retail, cleaning, landscaping, food preparation. And at the same time, the supply of Americans who traditionally filled these jobs — Americans without a high school diploma — has been dropping steadily. ... So we have a structural mismatch between demand and supply in our economy. And yet there's no legal channel for a peaceful, hardworking 24-year-old Mexican or Central American to come into the United States legally and fill these jobs that there are simply not enough Americans there to fill."

Fox Business Network Host: "This morning Mattel announced third quarter profits and sales that are higher than the same period last year despite three recent made recalls of Chinese made toys due to led paint. Will these recalls catch up with Mattel in the next quarter? Joining me now is Editor at Large of TheStreet.com Aaron Task and Dan Ikenson, Associate Director of the Cato Center for Trade Policy Studies. Good Morning gentlemen, let’s start with you Aaron. They have witnessed three toy recalls due to led paint and poisoning, how did this effect earnings?"
Aaron Task: "Well it was a really bad quarter, really, and I think the surprise is that they took a $40 million charge which sounds kind of small given the size of the recall and they missed expectations by $0.09 so there were other things going on than just the recall. The sales from Barbie Worldwide were down, what they call their other girl brand which is Polly Pocket was down pretty big and so I think Mattel has problems in addition to this recall. People just don’t want to buy the toys that they are making."

Fox Business Network Host: "Dan, lets talk about this for a moment. How much of this is confidence in a name like Mattel? They have been the dominant toymaker, have investors lost confidence in them?"
Dan Ikenson: "I think Mattel has an advantage here because they do have a brand name. I think they’re CEO went out before the public and did his best to reassure consumers that Mattel is doing everything they can about this. There has been a recent spate of recalls of consumable products like food, toothpaste and pet food. There is every incentive in the world for companies like Mattel to get this right. We don’t need more regulation, we don’t need trade barriers. This goes to Mattel’s bottom line, likewise it goes to the Chinese factories bottom line. They need to get it right if they want to be in Mattel’s supply chain."

Fox Business Network Host: "Aaron do you agree with that? If you’re a parent at home and you’ve owned a Mattel product, you are thinking about it now. I have three young boys, I walk in the store now when I’m buying gifts for other children and I’m thinking am I getting a product that might be dangerous for another child?"
Aaron Task: "Mattel does have great brand awareness but now the awareness is for a bad thing. I have a six year old daughter, she loves Barbie and she wants more Barbie’s but now I’m going to think twice about whether or not that’s the toy I want to get for her or her friends for their birthday parties. That’s the big risk for Mattel. The good news for Mattel is that all of this happened in the third quarter which means they have an opportunity to get it right before the holiday shopping season. If they don’t get it right, I think Robert Eckert’s job could be in danger here."

Fox Business Network Host: "What do you make of that, do you believe, Dan, that Eckert and Mattel have done enough, have calmed consumers’ fears as it relates to the toy recalls?"
Dan Ikenson: "I think that the fourth quarter will tell. That’s the real big buying season, the holiday season. I’d add that I have three kids as well, the lead issue is something that is serious. Cutting corners like that is not necessary to have a beneficial relationship with Chinese factories. I think they are doing a decent job, but ultimately, the consumers will render the verdict here. We don’t need more regulation, imposing costs on businesses across the spectrum, across the states, we don’t need new trade barriers. It’s almost like corporate social responsibility here, that’s a dirty word in business circles. Mattel has every incentive in the world to make sure that their brand name is in good shape and they’re going to spend money to make sure that they do that."

NPR Host, Susan Page: ...

BBC World News Host: "Chinese Manufacturer’s, as we were saying, the American regulators and the Government were told that they were to blame for the recent lapse of toy safety standards. That was at a Senate hearing in Washington earlier. Joining me now from Washington is Sallie James; she is a trade policy expert with the Cato Institute. Sallie, first of all, is this just becoming an excuse to point the finger at China once again as the trade deficit increases."
Sally James: "It could very well become that. I think it’s unfortunate that China is in the spotlight anyhow on a various number of trade policy issues. Even though its not trade policy per se it relates to Chinese imports and its very important that we prevent this from become yet another shot to fire at China unfairly even though the safety concerns may be justified."

BBC World News Host: "Well we’ve had a lot of concerns expressed about Chinese policy a bit earlier saying that even though they are saying that they’ll take steps that at the same time because of things like corruption because of a lack of a free press that there are still going to be problems. Do you think that it is in China’s interest to do something about this."
Sallie James: "Oh absolutely, absolutely. Four hundred factories have had their licenses rescinded, China, rightly or wrongly, is pursuing growth through export promotion and it is not in their interest at all to be seen by the rest of the world not only as maybe deliberately manipulating their currency but also to be a source of unsafe imports. It is absolutely in their interest if they want to continue growing and trading with the rest of the world, particularly rich countries that have high standards, that they live up to those standards."

Jamie Robertson: "Sallie, this is Jamie Robertson here in London, isn’t this perhaps symptomatic of something a bit bigger. That the Chinese government is not in control of the economic boom that is occurring in China."
Sallie James: "Well I think that it’s more likely that they are in control, but unfortunately they are perhaps too much in control in that its not very transparent who owns these factories. The local officials of the communist party have a lot of power, their scope from corruption, and as we are seeing in the United States is that the share market is exacting a very harsh punishment on Mattel for this. The factories are not going without punishment themselves, as I said a lot of them have had their licenses rescinded, but perhaps the government has too much control over this and that consumers don’t have as much control as they do in the United States say with liability."

CNBC Host: "You know the list; tainted toys, poisoned pet food, exploding tires and a number of recent recalls have the US asking if the Grinch will steal Christmas. But its not just safety that we are worried about as it relates to China. Some say china is fed up with criticism of its shoddy products and is retaliating by holding up its exports and blocking imports for us. Ryan Shackman just detailed that. We wonder if there is an unofficial, or perhaps better said, stealth trading war brewing. Dan Griswold the Director for the Center for Trade Policy Studies at the Cato Institute and Alan Tonelson a Research Fellow at the US Business and Industry Council. Gentleman Welcome, and we should mention that Diane joins us as well, she’ll be weighing in on this. Let me start with you Alan if I could. Is there a stealth trade war going on given China’s recent actions to hold up toy exports?
Alan Tonelson: Well actually China’s actions since this whole product safety scandal blew up in late spring early summer, it’s been pretty incoherent. There are some days when the Chinese wax indignant about how their products are just as good as anybody else’s and what’s the problem and you prejudiced Americans, you’re just anti-Chinese. There are various other days when Chinese officials openly admit that product safety and food safety has not been a high priority for us. We are at the very start of this; we are not expecting much progress in the foreseeable future because we have such an enormous challenge. So again the Chinese leaderships’ response has been pretty incoherent, and even more important, there is absolutely not prospect that the Chinese would start a trade war with us to a greater extent than they already had by virtue of being the worlds most protectionist most mercantilist major trading power but they need the US market desperately to jumpstart growth and maintain employment. Which they understand is the key to the leadership remaining in power. They need us more than we need them. And that is truth number 1 about US China trade relations."

CNBC Anchor: "Dan as I understand it, you don’t think that there is a trade war brewing either is that correct?"
Dan Griswold: "Let’s hope not, there are some legitimate concerns about safety but it would be folly on either side of this trade relationship to start a trade war. Three quarters of what we import from China are consumer goods that make our lives better every day at the home at the office and that’s especially import this time of year, this is when traders start gearing up for the Christmas season and you look at the toys and the shoes and the clothing that we import from China."

CNBC Anchor: "So then why take this action now if it’s not a retaliatory measure? Do you think that China is trying to come up with some sort of process? This is a key time of year though and if you want to hurt US business interest this would be the time to do it."
Dan Griswold: "One I think china is trying to tighten its regulatory regime. They are paying a high price, Mattel is paying a high price, and the market is exacting a price for this. Secondly, they may be sending a signal to the United States not to play politics with safety issues. And we have a lot to lose to, you know, we are the worlds major exporter of farm goodsand pharmaceuticals, if other countries decide to play politics with safety concerns we could lose billions of exports. Not just to China which is our fastest growing major export market but to other markets as well."

CNBC Host: ...

MSNBC Host: "Got Milk? If so, how about some milk money? You are going to need it big time because right now the prices in the diary aisle are soaring, as you’re look at these numbers it’ll show you that the average cost for a gallon of whole milk is up almost $0.70 in the past year, in just the last six months it’s up about $0.50. And some say that might not even be the worst of it, they’re could be more to come. One who says that, Sallie James who is a Trade Policy Analyst at the Cato Institute. Sallie, good morning again to you and you’re thinking that things aren’t looking so good for the milk gallons in terms of pricing it could get up over four dollars by the end of this year?"
Sallie James: "Yes, I think we’re looking at $4.50 possibly by as early as early fall."

MSNBC Host: "Four fifty. That’s just a huge leap. Five dollars, is that anywhere in the future as well?"
Sallie James: "I don’t think so. Internationally, things are tight supply wise. We’ve had droughts in Australia and New Zealand, where a lot of the World’s dairy products come from. European Union production has gone down and in the US, in fact, domestic product has been tight recently as well. Demand is a big factor here as well. China and India, those two behemoths, as they grow, as their people get a taste for western style diets including dairy; Pizza Hut, Starbucks, McDonalds have all opened up stores there in recent years and of course they’re pushing up the demand for dairy products just as supply is becoming a bit tight."

MSNBC Host: "There are a few things I’m trying to wrap my brain around as you talk about things where prices have been coming down recently, and I can’t think of too many, because we certainly do a lot of talking about high gas prices lately. There is this recent turn to ethanol based alternative fuels which apparently is contributing to the high food prices. How is that? What is the relationship there?"
Sallie James: "That’s a factor here too. Simply because dairy farmers in America feed their cattle on corn and corn, in America at least, is the main input into ethanol. So as corn farmers see this booming ethanol market it bids up the price for corn and dairy farmers have to pay more for the feed and then they pass that cost onto consumers."

MSNBC Host: "And again it’s not just milk that affected here. What else is getting more expensive, or what is not?"
Sallie James: "Exactly, not a lot is getting cheaper at the moment. Wheat and soybeans, which prices have gone up as well, obviously because the land that farmers use to grow crops is limited and to the extent that they are pouring all their energies into they don’t have that land to devote to wheat and soybeans. Coffee prices have been going up worldwide, sugar prices as well, so food generally is getting more expensive at the moment."

CNBC Host: "With the Beijing Olympics a year away, now China is taking action on everything from press access to smog. On Trade and Currency Issues, you know, many are clamoring for the Chinese to step up the pace on those issues. Was anything achieved by Treasury Secretary Paulson on his recent trip there? Are we in for a battle with Congress when its August recess ends? Joining us with their respective views on all of this; Dan Griswold, Director at the Center for Trade Policy Studies at the Cato Institute, Alan Tonelson is a Research Fellow at the US Business and Industry Council. Good to see you both thank you for joining us. Dan, I’m going to broaden this out even beyond Secretary Paulson’s recent trip, he’s been in office a little over a year, he came to office June of last year. Can you point to something that he has achieved in measured progress with the Chinese at this point?"
Dan Griswold: "Yes, our trade relations with China are on a solid footing, it’s mutually beneficial for both countries, the Yuan has appreciated ten percent since they floated it two years ago. Trade is increasing, trade barriers are falling, the Yuan is becoming more flexible, the Chinese have increased their cooperation with us on a broad range of issues, and American consumers are benefiting every day through low cost consumer goods coming into the country. We spend about two percent of our GDP on products made by the twenty percent of mankind that lives in China. There’s nothing wrong with that and we’re benefiting with exporters, China is the hot export market for American producers."

CNBC Host: "Alan what do you make of all that?"
Alan Tonelson: "Well I don’t know what planet Dan’s been living on but I’ll just give three quick responses. One, regarding China as the big export market, the Chinese themselves don’t believe this because, after all, their entire economic strategy is export led and the number one market for them is the United States. In fact, most of what the United States exports to China, comes right back here because it’s parts and components of finished goods. Second problem, because China’s international finances are so much stronger today than they were when President Bush finally began to get quasi serious about currency issues, China’s currency is even more undervalued today than it was back in 2005 when this very modest revaluation began. So highly competitive, in fact thoroughly competitive U.S. exporters and other manufacturers are even more behind the eight ball regarding China than they were 2 years ago."

CNBC Host: "Dan, I think you would acknowledge that Congress might take issue that the progress that some of the progress that Secretary Paulson has had. They are still talking very tough when it comes to the Chinese right now."
Dan Griswold: "I think Congress is behind the curve and they are reacting to political pressure rather than the facts on the ground. Our exports to China have more than tripled since 2000. They’ve grown eight times faster than our exports to the rest of the world. US consumers are benefiting everyday from imported shoes and shirts, and these are products we haven’t really manufactured in large amounts in this country for decades. So we’re not losing very many jobs and in fact we have full employment now."

MSNBC Host: "The US and China have come to an agreement on product and food safety just as Fisher Price recalled 1 million and a half toys worldwide because of hazardous lead paint. Almost a million of those toys were in the US market; 300,000 were sold before the alert. The recall list reads like a kids candy land; Big Bird, Grow me Elmo, Bedtime Dora, and Giggle Grabber Cookie Monster. Sallie James is a Trade Policy Analyst with the Cato Institute and is at the NBC News Bureau in Washington. Hi Sallie. A million toys in the US market, how did this happen?"
Sallie James: "Well China simply is a large import source for the United States so it’s not surprising even though it’s a small proportion of the total imports that we end up with a large number of problems."

MSNBC Host: "What kinds of rules and regulations are in place now to avoid things like this, to see that something you’re kid might put in his mouth might have lead paint in it?"
Sallie James: "Well the United States does have laws in place to make sure that that doesn’t happen. The problem that we have here is that they are imports and the FDA simply is not capable of inspecting every product that comes into the United States market. So, its not that their aren’t laws in place so much as some companies have not been obeying those laws. But, it’s really important to remember that there are also laws about the extent to which the United States can restrict imports or put conditions on them and its very important for the United States in it’s reaction to these problems not to go overboard."

MSNBC Host: "You write however that this is the 26th toy recall this year all involving toys produced in China so is there any evidence that the Chinese government really believes it needs to do a better job?"
Sallie James: "I think there is. They executed the head of an inspection agency not too long ago because of problems relating to the approval of products. The extent to which private companies are stepping in is important to notice as well because in fact the latest problem with the toys from Mattel was discovered by the factory not by the United States government inspectors, or by the Chinese."

CNBC Host: "Alright so here it comes, a long, anticipated showdown between the White House and Congress on how best to address China's currency. Tomorrow some very powerful senators will be unveiling a bill aimed at holding China more accountable over that government's claim that China's currency manipulation and unfair trade practices have given it an added benefit relative to our economy especially when you consider the trade relations between our two governments. Supporters say it's high time for a crackdown like this; critics say legislation like this will only lead to an economic and diplomatic rift between the two world superpowers. Daniel Ikenson is with Cato's Center for Trade Policy Studies. We don't know the details of this bill, it won't be official until tomorrow, but we probably have a pretty good idea that it involves tariffs of some kind, that's what senator Schumer and Graham have talked about in the past. [...] Dan, what do you think?"
Dan Ikenson: "Chuck Shumer sponsored legislation like this in the last congress and then after a trip to China, in the Wall Street Journal he wrote an op-ed where he said, you know, wasn't really that serious about it. We're concerned about the trade deficit, but imposing tariffs to try to affect some sort of a change in that equation is really not a good idea. What we have here is a political problem; it's not really an economic problem. Unless and until Congress and Lloyd and organizations like Lloyd's come to realize that the Chinese are not subservient to US demands, that they're not going to jump when we tell them to jump, that they're acting in their own interests, then they're always going to be disappointed."

CNBC Host: "Would you take a slower pace as Secretary Paulsen today, responding to this, saying you know you gotta take your time, this is not going to happen overnight?"
Dan Ikenson: "I think Paulsen has it absolutely right, I think the Bush administration's approach to China has been dead-on. I wouldn't give them kudos on their entire trade policy package, but with respect to China it's been right."

[...]

Dan Ikenson: "I don't think that the Chinese currency value has anything to do with the loss of three million manufacturing jobs. US manufacturing is in record shape, record profits, record revenues throughout manufacturing. A couple of industries: textiles and apparel, things like that, aren't doing all that well, but there's no reason to not acknowledge the fact that the Yuan, the Chinese currency, has been appreciating by about 8% since July 2005. The deficit hasn't gotten any better. Do critics of China acknowledge the fact that we have seen some realignment and expansion of the trade deficit."

CNBC Host: "The debate rages on whether the recent trade talks between the US and China succeeded or not. Is China misbehaving? [...] Dan Griswold heads the Center for Trade Policy Studies at the Cato Institute and says we are right on track. Dan, you say the current plan is working. How?"
Dan Griswold: "China has made tremendous progress. Yes, they have a ways to go but they've come a long way and we're winning everyday. Americans are winning in the marketplace in terms of trade it's a win-win-win. We're winning as consumers through lower prices and a wider array of consumer goods that are making our lives better every day."

CNBC Host: "But Dan the bigger picture is this huge trade deficit with China."
Dan Griswold: "Well, we're winning as exporters as well. Let's not forget the benefit of imports that benefit American families and US companies every day. We're benefiting as exporters. China is the hot growth market. Most US companies see China as a dazzling opportunity, not as a threat. And let's not forget as borrowers we're winning. Savings coming to the United States from China lowers interest rates for US homebuyers and taxpayers. And there are a few US manufacturers that are facing competition but most of them are doing quite well thank you very much. Collective profits were $400 billion dollars for US manufacturers last year."

[Professor Pete Morici, former chief economist for the US international trade commission speaks]

CNBC Host: "Surely protectionism isn't your solution, Professor Morici, is it?"
Dan Griswold: "Unfortunately, it is."

Professor Morici: "No, it's not. China is the one that's practicing protectionism. It's subsidizing its exports and by suppressing the value of its Yuan it's implicitly imposing a 24% tariff on imports. It's really rather silly to say that we would be protectionist for responding to Chinese mercantilism."
Dan Griswold: "US exports to China have been up 24% per year compounded average. If the purpose of China's currency is to discourage US exports to China, it's been a total failure and of course it's not. China is moving towards a more flexible currency. Half the countries in the world have some kind of fixed currency so they're moving in the right direction, the yuan has appreciated 8%."

Professor Morici: "No one intervenes at the level they do to sustain their fixed currency which is really chronically undervalued. While our exports have grown, our imports have grown much, much more."

Dan Griswold: "And Peter, what's wrong with imports. Manufacturing output is up 40%. Jobs are disappearing because of productivity."

CNBC Host: "Should we crack down on China, get congress involved to enforce trade rules? Daniel Ikenson, policy analyst at Cato's Center for Trade Policy Studies says we need to get tough on China but not with more congressional involvement. Ok, if not with more congressional involvement, how do we do it?"
Dan Ikenson: "Well, the administration in 2006 said the honeymoon period with respect to China is over. We've given them five years to fulfill their WTO obligations. They've done a very good job in many areas, in some areas they're lagging, so now we're going to start taking a new tact, we're going to consider a WTO dispute settlement, that process, for China as it does with Europe and Japan and other countries with whom the United States has a mature relationship. This year the United States filed three cases against China in the WTO. And, you know, the first stage of the dispute settlement process is negation and that is going on this week in Washington. I have the feeling that coming out of these talks is going to be some progress on a case involving subsidies that was filed in March. The Chinese I think have hinted that they're going to be cutting the tax breaks that they give their exporters, are going to be changing their laws so that the import consumption is not dissuaded. And I think that is progress. What we don't need is for congress to be so provocative with the legislation it's proposing and do something that would violate our own WTO commitments and possibly spark a trade war."

CNBC Host: "Jonathan, you want congress to get more involved. Are you new in town?"

Jonathan Jacoby, associate director for international economic policy at the Center for American Progress: "Congress does play a role here. It's kind of the classic example of good cop and bad cop. The administration led by Secretary Paulsen, in this case, wants to take this long-term dialogue approach and I can't blame him for that but at the same time I can't blame congress for looking at the job loss that has hit the United States in a number of districts and then saying well is there anything that we can be doing to enforce our trade laws with China more effectively and that's where the administration really hasn't enforced up until they felt this pressure from congress, so at this point congress has a new voice and a more empowered role to play looking at currency manipulation and so on and if they're happy to play the bad cop role I think that's an important role for them to play because this is oversight that wasn't there when the Republicans were heading up Congress for the last six years."

CNBC Host: "Daniel, what do you think of that plan?"
Dan Ikenson: "Well, you know, I think Jonathan makes a mistake. This administration has been fairly forceful with respect to administering the unfair trade laws under the Bush administration there have been more cases brought against China, anti-dumping cases, than any other time in history. I think that the job loss situation, it's hard to really attribute that to trade. One of the problems in Congress is that there is this myth that manufacturing in the United States has imploded and it's attributable to unfair trade from China in particular and as a result we need to respond, but the fact is that manufacturing is doing quite well. In 2006 output is higher than it has ever been, revenues from most manufacturing industries are in record levels and profits for most of the 21 manufacturing sectors that are broken out in the government data are near record levels as well there's been a decline in the number or workers and wages have increased slightly but manufacturing is not in bad shape."

Dan Griswold discusses immigration reform on Fox News The O'Reilly Factor.
May 21, 2007.

Michelle Malkin, Fox News Host: "Joining us now from Washington, Daniel Griswold of the Cato Institute and from Boston, immigration attorney Susan Church.
"Thanks to both of you for joining us. Daniel, I want to go to you first about this tactic now in Washington to cut off debate, have this vote, and basically make sure that nobody gets to debate this bill and -- while most people in Washington haven't even read it. Isn't that an outrageous abridgement of the deliberative process?"
Dan Griswold: "I'm all for the deliberative process. You know, we've been debating immigration for years and years. And the main provisions of this are pretty clear to the public. And I think we should have an extended debate in the Senate. I think a couple of weeks is entirely reasonable, but let's down to the substance.
"What are we going to do about illegal immigration? We have poured billions of dollars in trying to intercept it. It's been a complete failure. We need to have a workable temporary worker program. We need to legalize the people here. This is not amnesty. We're not going to give them permanent status. They're going to have to wait at least eight years before they even qualify for permanent status. And then, we can enforce the border against criminals and terrorists who are trying to sneak across."

Michelle Malkin, Fox News Host: "Daniel, I want to stop you right there, because it's this exact formulation that I just mentioned in my "Talking Points," about how we should give the amnesty now and do the enforcement later that has never worked. That was the lesson of the 1986 amnesty. We heard from folks like you at the time. Yes, yes, yes, we'll get to the enforcement. We never got it to it despite your claim that interior enforcement and border security has failed. It's never been done."
Dan Griswold: "You know what was missing in the 1986 act? It had no provision for future workers. There was no guest worker program there. Yes, we drained the pool of illegal workers with the amnesty back then. And then we tried to enforce it, but it had no temporary worker program. That's what's different this time.
"Let's try something different. We have tried enforcement only. It's been a spectacular failure. We need to recognize the needs of our economy and allow workers to come in legally, rather than..."

[...]

Michelle Malkin, Fox News Host: "Go ahead, Daniel."
Dan Griswold: "Michelle, we need both kinds of workers. You know, the beauty of immigration is they fill niches in the U.S. labor market at the high end, the high skilled, but we also need these lower-skilled workers."
"The pool of Americans who have traditionally filled these jobs has shrunk. We need these workers. Important sectors of the U.S. economy depend on these workers. If they can't find the workers here, they'll move abroad or those sectors will just shrink, jeopardizing jobs for Americans. And we'll be more secure, too."

Michelle Malkin, Fox News Host: "Quick question for you, Daniel."
Dan Griswold: "Yes."

Michelle Malkin, Fox News Host: "Is there any limit on the number of foreign workers that you would accept for the number of foreign workers coming into this country? Any limit?"
Dan Griswold: "Well, I think the 400,000 or 500,000 visas is about right. Actually, I think our economy sets a natural cap because if there's not demand here, they won't come. They're coming to fill jobs here. If we let them in legally, we can concentrate our enforcement fire power against criminals and terrorists as we should."

Rep. Barney Frank: "The issue here is whether adults who work for their money in the comfort of their homes, should be allowed to engage in a form of recreation which they enjoy and which has no conceivable negative impact on anybody else."

Bloomberg Host: "I gather you're in support of what congressman Frank outlined today, this is a move that you think is appropriate?"
Sallie James: "I am. I don't think it's the role of government to interfere in what private citizens do in their own homes with their own money. And I also think that removing this ban will have trade benefits because part of the problem with these laws as they stand is that the world trade organization has ruled them to be violative of the United States' obligations in the WTO and if the laws continue as they are then Antigua and Barbuda, another WTO member who has brought this case against the united states, would have recourse to retaliation in the WTO. So I think there's a civil liberties issue with these bans and there's definitely a trade issue with the ban as well."

Bloomberg Host: "Is this a states' rights issue?"
Sallie James: "I think it's a human rights issue. I think it's an individual rights issue. And I think that really what responsible people do in their own home is up to them. And I think certainly there are issues about maybe children having access to this sort of thing online and you know they don't have the same rights as adults. but I think it's up to responsible parents to take action in that way. Adults do things all the time which may not be always responsible, but I don't think it's the role of government to ban everything in case it gets out of hand."

Bloomberg Host: "Could this be a positive revenue stream for the government?"
Sallie James: "Yea, I don't think I would ever advocate regulating it as a source of revenue. I think the government takes more than enough money from taxpayers as it is. But the states may be concerned, I think, about the monopolies they have on things like lotteries and places like Nevada and New Jersey. They may be concerned about the monopolies they have on gambling services, so there may be some protectionist interests there involved as well."

Bloomberg Host: "There's always been a connotation with gambling, perhaps a concern that it could lead to wider problems for younger Americans, addiction to gambling. Why isn't that a reasonable government interest here?"
Sallie James: "Because I don't think it's right for the government to ban something because a few people take it to extremes. Let's think about alcohol for example. A lot of people are not able to handle alcohol in moderation, but yet we don't ban it outright for everybody and I think that goes for gambling as well."

Bloomberg Host: "Do you think this is going to be a closer fight than a lot of people expect?"
Sallie James: "I'm not sure but I hope it's not a multi-year issue because as I said before the longer this goes on, Antigua and Barbuda may in fact retaliate against United States laws that could involve, and they've signaled they're interested in suspending their obligations to protect United States companies' intellectual property rights and they are able to do that under the laws of the WTO, so the longer these laws are on the books..."

Bloomberg Host: "You think that's a legitimate threat right now?"
Sallie James: "Oh, I do. I really do and I think that's something we have to keep in mind when we're talking about how long this may go on, but I hope it's successful and good on some republicans agreeing to join."

CNBC Anchor: "We are back. Congressional Democrats are urging the Bush Administration to take a tougher stance on China, arguing the U.S. should do more to protect Americans and end China's unfair trade advantage. Opponents say a tougher approach could actually backfire against American consumers. Is the Bush Administration too late on getting tough with China or not? Alan Tonelson is a research fellow at the U.S. Business and Industry Council. He says the pace of reform is not quick enough. Dan Ikenson is associate director of the Cato Institute's Center for Trade Policy Studies. He says the Bush Administration has been getting tougher so let's see. Alan, let's start with you. Not tough enough, right?"
Alan Tonelson: "Well, Mort, I would say not smart enough. It's really a matter of being smart and recognizing the nature of the trade challenge that China poses. China needs to be seen as an entire system that is geared towards growing by overproducing manufacturers and sending the surplus overseas, dumping that surplus overseas. Two main reasons..."

CNBC Anchor: "That's what we use to accuse the Japanese of."
Alan Tonelson: "That's right. They were doing it too and the Chinese have now followed in their footsteps. They're doing this for two main reasons. One, they desperately need to create jobs and China's market is not nearly big enough to absorb all the manufactured goods that China needs to keep job creation going. And secondly, China wants more military power and more global influence and the way that you do that is you make increasingly advanced manufactured products that meet the test of world markets and so China, therefore, wants to achieve global industrial supremacy and they will stop at nothing to meet that goal."

CNBC Anchor: "Let's give Daniel a chance to take issue with you if he wants."
Dan Ikenson: "I would say if there is anything commendable about the Bush Administration's performance over the past six years it is the way it has managed the U.S.-China trade relationship. When China joined the WTO in 2001 it agreed to undertake vast commitments to reform. It has done a pretty good job at that and the U.S. Trade Representative's office in the Bush Administration has said that. But the Trade Representative's office also said there are improvements that can still be made and that the honeymoon period is over and that we now need to do a better job of holding China to account and I think getting tough with China by bringing cases within the WTO, within that dispute settlement system, is perfectly legitimate and it is likely to lead to some resolution.

"The alternative, which I think people like Mr. Tonelson would propose, people who think the Bush Administration isn't tough enough would prefer that Congress impose unilateral tariffs or pass legislation that is otherwise punitive to China, that, in my view, could spark a trade war because China would be within its rights to retaliate if we acted outside of our own WTO commitments."

CNBC Anchor: "Alan?"
Alan Tonelson: "The fact is, from the Chinese standpoint we are in a trade war right now. They want global manufacturing supremacy, they will stop at nothing and they have shown this repeatedly. They've been in the World Trade Organization for more than six years, why do they deserve any honeymoon period whatever? We would never do that in the American legal system when you break the law you are held responsible right away. You are not excused for this. Why do they wait so long?

"The reason is that U.S. trade policy is completely controlled by major economic interests in this country who benefit from China's trade cheating. First would be multinational companies who manufacture there who strongly benefit from China's currency manipulation and China's massive range of manufacturing subsidies and secondly, it's run by American retailers who want to sell cheap goods to American consumers and get them from China, like Wal-Mart."

Dan Ikenson: "I think there was a honeymoon period because exporters, producers in the United States, in Europe, and around the world recognized that China was engaged in a massive undertaking here and didn't want to be provocative and..."

Alan Tonelson: "Then they weren't ready for full membership, plain and simple."

Dan Ikenson: "Well, I don't think so. I think we've all benefited tremendously from China's membership in the World Trade Organization. There seems to be this focus on the trade balance as though that is the scorecard that we should all be following. Look at our economy. Our economy has been growing handsomely, our unemployment rate is 4.4%, and we create 1.8 million jobs per year.

"You know, the Japanese have had a trade surplus for a long time and their economy grew at less than 1% per year for twelve years from the mid-nineties to the mid-two-thousands; same with Germany, double-digit unemployment, huge trade surplus. What should be the focus of economic policy: trade balance or real economic growth?"

CNBC Anchor: "Very quickly if you want to respond."
Alan Tonelson: "Well, this is the kind of economic policy happy-talk that comes from Washington all the time, forgetting the fact that the U.S. economy has been on steroids since 9/11 in the form of super low interest rates that you folks report on every single day and massive federal budget deficits so of course there is more economic activity. It is not sustainable."

CNBC Anchor: "We've got to leave it there gentlemen I'm sorry."

Segment 2: Facing China's fresh produce import, the U.S. farm bill debate

Existing U.S. farm subsidy policies have been the subject of violent protests outside some World Trade Organization meetings, calling it the way of subsidizing U.S. farmers at the expense of poorer ones around the globe. U.S. fruit and vegetable growers, with their much smaller farms, have never been part of this debate, in part because their crops yielded higher returns, did not need much support and were never organized around a single policy goal. But times have changed. In the face of tough new competition primarily from China, for the first time, U.S. produce farmers joined hands together and formed a lobby group intended to pressure politicians over farm bill debate. The other day, I interviewed Dr. Sallie James for this topic. Dr. James is policy analyst with Cato Institute. Let's play the clip.

Guest: Dr. Sallie James, policy analyst, Cato Institute.

BBC Host: "Now it's the perennial issue of trade policy because the Democrats are throwing their weight around on Capitol Hill. Charles Rangel, who is the chairman of an influential committee, is looking for changes in trade policy, even though the right to negotiate trade treaties belongs to the president. Of course, the president's so-called fast track negotiating authority expires soon unless the Congress renews it. So, just as the clock is ticking the Democrats have raised new issues affecting the environment, labor, and pharmaceuticals. Deals in the works with specific countries include Peru, Columbia, Panama, and, a very big one indeed, South Korea.

"Joining us from Washington is Daniel Ikenson, who is a trade policy expert with the conservative think tank the Cato Institute. Daniel, welcome to the program."
Dan Ikenson: "Thank you."

BBC Host: "Daniel, the Democrats are saying that their proposal will move us a step closer to freer trade with some of the countries I mentioned there. What would you say?"
Dan Ikenson: "Well, I would say, as an advocate of trade liberalization, I feel a bit duped since the elections here in November in the United States, where the Democrats took control of the Congress, we've been reassured by Democratic moderates that despite the rhetoric of the rank-and-file, the hostile rhetoric about trade, that the leadership understood that trade is an important tool for advancing economic growth around the world. In reality, today's unveiling demonstrates that the party really just wants to sing to the tune of the unions, its benefactor, and doesn't have much interest at all with working with the administration to get these last four bilateral agreements concluded. And it doesn't bode well for the broader multilateral round, the Doha Round."

BBC Host: "Let's just go back to the bilateral deals there because the clock is ticking. Do they actually have time to push through the kind of measures that have been proposed?"
Dan Ikenson: "Well, it's kind of unclear. There were very few specifics as to what the Democrats would need. For example, the Peru agreement and the Columbia agreement are done. If there were side letters to change the terms of the labor and environmental provisions maybe there would be time, but if the Democrats were to demand that the negotiation be reopened so that those terms be directly inserted into the agreement I doubt that there's time. I doubt that there's time to conclude the Korea agreement also because of other demands of the Democratic trade leadership. Specifically, the problem there is Congressmen Rangel and Levin want a new approach. Rather than saying the Koreans can have graduated access to the U.S. market and vice versa they are predicating Korean access to the U.S. market on U.S. sales success in the previous year.

"So in other words, the U.S. auto producers will ultimately be able to dictate whether or not and to what extent they want Korean competition in the United States by whether they try to sell in Korea and I think that is very flawed, it's a deal breaker, and I'm very concerned."

Jamie Robertson: "Jamie Robertson here. Now from what you're saying about the Democrats' agenda they would be pushing for the revaluation of the Yuan in China?"
Dan Ikenson: "That's on their list of things to do. They've brought that us quite a lot. Many members of Congress, particularly Democrats, view exports as good, imports as bad, our trade balance is the score board, we have a big trade deficit, therefore, we are loosing at trade and we are loosing because our partners are cheating, and the biggest forms of cheating are currency manipulation in places like China and Japan. There's no way we can do anything about that in the next five days. Five days from now is the deadline, which the Administration needs to notify Congress of these agreements. Trade Promotional Authority expires three months later so none of the changes that were stipulated today can really be implemented. Perhaps the Democrats have something in mind, they're talking behind closed doors with the Administration, with key specifics as to how to bridge the gap and how to move the agenda forward, but I really doubt it. The rhetoric in this proposal is extremely anti-trade and to me it suggests that the trade agenda is dead for the next two years at least."

CNBC Host: "Dan Ikenson, is [China] a non market economy? Pitch in here."
Dan Ikenson: "I would say that Mr. Hankinson's position is fictitious. What we have here is a WTO member China, and if we have issues with China, if we feel they are subsidizing, if we feel they are not enforcing intellectual property laws or doing something wrong, we have a course to action within the WTO. As you implied Larry, that is the way we should address our problems with China, not unilaterally through protectionist legislation."

[Responding to suggestion that US is overly dependent on China] "I think you are giving to much credence to this idea that China and Japan somehow have us over a barrel because of their holdings of US securities. They are very interested in seeing a strong secure US economy. They don't want the value of the dollar to go plummeting."

CNBC Host: "I am looking, Dan Ikenson, I don't see the damage, but I see a lot of benefits to the United States from Trade."
Dan Ikenson: "Yes I think the economic fundamentals are sound. If we do start poking China in the eye and there is some sort of retaliations we could have some problems. I think policy makers focus on the trade balance, as though that is the most important score card. Let's look at our economic growth, our unemployment rate, and our job creation rate. We are doing quite well."

CNBC Host: "Dan Ikenson, if a Japanese company buys an American movie studio or they invest in an American bank, or if they acquire a failing company, say Chrysler which appears to be on the market, why is that a bad thing?"
Dan Ikenson: "It isn't a bad thing. I think the more bidders the better. It is better for the stockholders. It is better for the employees or potential employees. We need foreign investment and really if you are concerned about the Chinese buying government securities, lets talk to our congress about getting the budget under control. Let's cut spending. That is what the primary cause of this inflow is, it is to subsidize wayward spending."

CNBC Host: "Who benefits from this?" [In reference to large amount of US Imports]
Dan Ikenson: "As you alluded to, Russ Robinson and the other econ professors at George Mason point out: imports are the things we get to consume and don't have to produce, while exports are the things we have to produce but don't get to consume."

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