WASHINGTON - China's bid to buy such marquee American companies as Unocal Corp. and Maytag Corp. prompted a strong political reaction in Congress yesterday, with some lawmakers calling on the Bush administration to take a tougher stance against Beijing's trade policies and investigate its effort to take over a major U.S. oil company.
Many economists said China is trying to hedge its bets by trying to purchase Unocal, hoping to nail down supplies in case of any future disruptions in the oil market. They also said Beijing has apparently made a major shift in its economic policy by deciding to use its new financial prowess to buy high-value, brand-name American companies.
Clyde Prestowitz, president of the Economic Strategy Institute and author of a book on China's economic growth, said the bids for Unocal and Maytag "are just the beginning. We are going to see a lot more of this as China emerges as an economic powerhouse."
Like Japan in the 1980s, China has raised fears that it will use the billions of dollars it has garnered from exports to the United States to buy more American companies and real estate, spreading its economic influence by what many analysts consider to be unfair trade practices.
Some analysts said Beijing's bids for the two American companies might serve as a wake-up call for Washington to take a more aggressive economic negotiating stance against the Chinese. Frustration over China's growing trade surplus with the United States, the pirating of American brand-name products within China and its refusal to change the value of its currency, despite administration pressure, spilled over at a hearing of the Senate Finance Committee.
Sen. Max Baucus, a Montana Democrat, said the administration "seems to have no plan" to deal with the U.S. trade deficit with China.
Under sharp questioning by Democrat John Kerry of Massachusetts, Treasury Secretary John Snow said the administration is conducting a "bottom-to-top review" of enforcement actions that could be taken to reduce America's trade deficit with China, which totaled $162 billion last year.
Federal Reserve Chairman Alan Greenspan cautioned Congress against taking protectionist steps against the Chinese, saying such moves could cause a bigger problem by sharply slashing trade with many Asian nations that use China to assemble their products sold in the United States.
Still, Democratic Sen. Charles Schumer of New York said he plans to proceed with legislation that would impose a 27.5 percent tariff on Chinese goods within two years, saying that gives Beijing plenty of time to change its policies.
Sen. Lindsey Graham, a South Carolina Republican, declared, "No more saber-rattling. We want results."
Snow said an investigation of any sale of Unocal to a Chinese nationalized oil company, CNOOC Ltd., is hypothetical until there is an actual transaction, but he indicated that the government's Committee on Foreign Investments in the United States likely would be called on to probe any deal.
Rep. Richard Pombo, a California Republican and chairman of the House Resources Committee, said a Chinese purchase of Unocal would not be in America's best interest. He said the proposed deal raises important security issues that should be investigated.
While he said he believes in free trade, Pombo said, "We cannot determine whether CNOOC would be doing the bidding of the free market or the Chinese government as it views its energy, economic and security interests. Asking questions at this time is appropriate."
Gary Hufbauer, an economist at the Institute for International Economics, said a sale of Unocal raised important security concerns that need to be resolved.
The state-owned corporation could direct Unocal's oil supplies to China on a preferential basis in case of supply disruptions, he said, or could negotiate long-term contracts calling for China to get cheaper oil than other buyers around the world.
Hufbauer said China's "grand strategy" appears to be buying resource-based companies like Unocal to have guaranteed supplies. In Maytag's case, he said, "they appear to be taking an industry that is close to proficient and buying a brand name as a distribution company for their products."
At the Senate Finance Committee hearing, Greenspan threw cold water on hopes that forcing China to increase the value of its currency, the yuan, against the dollar would help the U.S. economically. China now pegs the value of its currency to changes in the value of the dollar. Greenspan said he was "aware of no credible evidence" that forcing China to change the value of its currency "would significantly increase manufacturing activity and jobs in the United States."
Many economists agree with Greenspan, saying that the fault lies more with American consumers hooked on foreign goods than on currency valuations. Barry Bosworth, an economist at the Brookings Institution, said the U.S. is "on a wild consumption binge" that can only be corrected at home.
Nonetheless, Snow said the Treasury is continuing to press the Chinese to boost the value of their currency against the dollar.
The Chicago Tribune is a Tribune Publishing newspaper.