The Chinese economy has a voracious appetite for resources – timber, iron ore, diamonds, copper, oil, rare earth elements and other raw materials needed for China’s industries. China is obtaining these resources from all over the planet, mainly Africa, Brazil and other resource rich nations. They use these resources to dominate manufacturers in the U.S. and elsewhere.

Despite higher labor costs, Germany and Japan have put in place policies that deter this mercantilism from China and, as a result, have retained most of their manufacturing base due to smart tax and trade policies that countered Chinese mercantilism.  Not so for the U.S.

According to the Economic Policy Institute, the U.S. is losing half a million jobs to China every year. Our trade deficit with China in 2011 was $295.5 billion. This was the biggest trade deficit that one country has had with another in the history of the world.

Every year hundreds of billions of dollars leave the United States and go to China. Our once great manufacturing cities like Detroit are deteriorating while new factories and skyscrapers are flourishing in China. China has loaned the U.S. over $2 trillion, which has given China a tremendous amount of leverage over us, and they have been buying up our businesses, real estate, and natural resources.

According to former Representative Betty Sutton (D-OH), an average of 23 manufacturing facilities per day closed down in the U.S. in 2010.  The U.S. lost 33 percent of its manufacturing jobs since 2000.

China is now the number one supplier of components that are critical to the operations of U.S. defense systems.  A recent investigation by the U.S. Senate Committee of the Armed Services found more than 1 million counterfeit Chinese parts in the Department of Defense supplies.

Major road and bridge projects all over the U.S. are being engineered by Chinese companies while millions of American workers are jobless.

According to author Clyde Prestowitz, China’s number one export to the U.S. is computer equipment. According to the U.S. News and World Report, during 2012, the number one U.S. export to China was scrap metals for recycling into products for more American consumption.  The U.S. spends about $4 on goods and services from China for every $1 China spends on goods and services from the U.S.

After being bailed out by U.S. taxpayers, GM is now involved in 11 joint ventures with companies owned by the Chinese government. The price of entering into these joint ventures with the Chinese was a transfer of state-of-the-art Technology from GM to Communist Chinese.

How did our Founding Fathers and previous U.S. leaders handle this type of economic attack?

Our nation’s founding was predicated on the issue of independence versus colonization by Britain.  Many fought and died to allow colonial farmers and manufacturers to produce for our local economy rather than send raw materials to England while being forced to buy British tea, paper, etc.

In 1861, President Lincoln fulfilled a campaign promise by introducing the Tariff Act of 1861 which allowed American producers protection from predatory mercantilism from foreign manufactures.  What followed were decades of American innovation and prosperity.

In 1985, President Reagan forced Japan’s hand when he insisted on reciprocity from Japan or they would face tariffs on automobiles.  To make his point clear, he imposed a 40% tariff on motorcycles.  Japan got the message and stopped their protectionist practices.

What has been the U.S. response since Reagan?

Since the 80’s, our leaders have taken a laissez faire approach, trusting the market to take care of any cheating.  What they failed to account for is that American businesses have been forced to compete against state-owned enterprises.  Just as plantation owners in the South fought to preserve slavery so they could maintain an unfair advantage in cotton production, today’s transnational corporations fight for the status quo so they can use third world workers without labor standards.

While this serves the transnational corporations well, it does not serve Americans well.  Products are cheaper at the point of sale, but any perceived savings is more than lost when considering hidden costs:

-Safety net costs like food stamps and unemployment payments

-Higher fuel cost due to tremendous shipping expenses

-Withering of American production and innovation which future generations depend on for jobs

-America prints money to cover the lost income from exports to pay for the intangible costs mentioned above.  China prints money to purchase about $2 billion American dollars daily to maintain a 40% advantage from the discounted Yuan.

What needs to be done?

Maintaining this vicious cycle is unsustainable and damaging the U.S. and world economies.  Instead, returning to a virtuous cycle of balanced trade should be a top priority of our leaders.

President Obama asks corporations to ignore their fiduciary responsibilities and do the patriotic thing.  Instead he should ask how our federal tax and trade policies advance American interests.

Unless America stands up to China and demands fair trade, as Reagan did with Japan, China will continue on its path toward world domination.  Meanwhile, China takes advantage of the push towards “Globalization” of world economies.

So the answer to today’s question is yes…China is colonizing America….if we continue to let them.  China has set a clear path to colonize much of the world.  The world looks to America to take the lead on this threat and most other issues.  As long as we keep electing feckless leaders who prefer fighting amongst themselves to focusing on external threats and solving problems, nothing stands in China’s way.

While presenting to a business group, I stated that the largest U.S. export to China was empty shipping containers.  A gentleman responded with a statement that haunts me to this day.   He said those containers aren’t empty….they are full….full of our kids’ and grandkids’ future.

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Frank Shannon served in the U.S. Army, was an engineering/operations manager for AT&T for 27 years, was the owner of a small manufacturing business for 23 years, served as Colorado Chair of the Coalition for a Prosperous America and moved to Mesquite in 2013.