Read Online Free Lunch by David Cay Johnston - Free Book Online Page B

invisible hand of the market. And, from their perspective, they fully grasped the
idea of acting in your own self-interest.
    But wait, there’s more.
    A company with operations in the United States and another country can borrow money at home, deducting
the interest and thus lowering its American taxes. At the same time it can earn interest on untaxed cash it keeps overseas. So when
an American company closes a factory here and moves it to China, provided it meets some technical rules, it can deduct the
interest charges on its United States tax return while building up profits offshore that may never be taxed.
    On top of all of this, a company that moves its factory to China will not have to worry about pesky union
organizers seeking more pay or even reasonable work rules, like toilet breaks and job safety committees. Mao said that political
power grows out of the barrel of a gun, a cruel reality known to every grassroots union organizer in China.
    During the Reagan years, China grudgingly agreed to play by a set of civilized rules in return for receiving
most favored nation status with the United States, a huge benefit for countries trading with America. Later China joined the
worldwide trade movement. China was supposed to impose basic environmental controls, treat unions fairly, and respect human
rights.
    For their part, China and other poor countries complain that such requirements were
not imposed on America and Europe when they developed.
    These demands by first-world
trading partners were an attempt to level the playing field with workers in other parts of the globe while bringing rudimentary
workplace advances to Chinese laborers. No one was under the illusion that China would follow the highest American or European
standards for pollution controls or welcome organized labor demands, but by forging agreement on these issues, the humane
aspects of modern life might get a toehold in China’s developing economy. At least that was the plan. There is one significant
group fighting proposals to give Chinese workers the right to organize—American businesses that want to pay as little as possible
in China.
    With near total impunity, China ignores rules it finds inconvenient. Counterfeit copies
of American software turn up in the offices of the Chinese government. Pirated movies and music are openly sold on the streets of
major Chinese cities. Reports of forced labor abound. Only government-controlled unions are allowed—and independent
organizers sometimes are shot. Toxins pour into China’s rivers and foul not just its air, but the air everyone in the Northern
Hemisphere breathes. Dangerous additives designed to create the appearance of high protein content have been found in animal
food, killing some American pets by destroying their kidneys. Later, toxic ingredients were discovered in some human food, toys,
and toothpaste that China had exported to the United States in 2007. Beijing did act to stem this particular scandal, by executing a
former senior government official.
    As recently as 1985 trade between the United States and
China was balanced, with exports to China equal in value to imports from China. Since then exports to China have grown
enormously, but imports from China have grown five times faster, government data show. In 2006 the trade deficit with China
reached $232 billion. That equals more than $60 per month for every man, woman, and child in America.
    To get a feel for how large this trade deficit is, think about how much you have in income taxes deducted from
your paycheck. In 2004, when the trade deficit with China was $161 billion, it was significantly more than the $126 billion of income
taxes paid by the bottom 75 percent of Americans. Politicians rile people up about the burden of taxes. But few of them take on the
government rules that encourage ever-larger trade deficits that drain our wealth and put American factory hands out of work to
help China