Wisconsin Public Radio

Manufacturing is still critical to the economy United States. Clyde Prestowitz, says it's time to start realizing the positive spillovers that manufacturing creates... Read more  

Events & Activities

Stephen Olson at Chinese Development Institute Conference

 

 Clyde Prestowitz giving presentation to CDI...

 

Steve Olson teaching trade negotiations at the Mekong Institute...

 

Stephen Olson to speak at upcoming workshop organized by the International Institute for Trade and Development on 

"Economics of GMS Agricultural trade in goods and services towards the world market"

Chiangmai, Thailand Sep 8-12.

(06/24/05) Clyde Prestowitz quoted in the St. Paul Pioneer Press

(06/24/05) Clyde Prestowitz quoted in the St. Paul Pioneer Press
Congress frets over China bids
St. Paul Pioneer Press (MN)
Copyright 2005 St. Paul Pioneer Press
June 24, 2005


Congress frets over China bids
Some lawmakers want tougher trade stance after Unocal offer

BY WILLIAM NEIKIRK, Chicago Tribune

WASHINGTON -- China's bid to buy such marquee American companies as Unocal Corp. and Maytag Corp. prompted a strong political reaction in Congress Thursday, 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.

WASHINGTON -- China's bid to buy such marquee American companies as Unocal Corp. and Maytag Corp. prompted a strong political reaction in Congress Thursday, 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 seeking 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.

The bids for Unocal and Maytag "are just the beginning," said Clyde Prestowitz, president of the Economic Strategy Institute and author of a book on China's economic growth. "We are going to see a lot more of this as China emerges as an economic powerhouse."

Chinese state-owned oil company CNOOC Ltd. made its unsolicited $18.5 billion bid to buy Unocal on Wednesday. Chevron Corp., which has a deal in place to buy Unocal for nearly $16.6 billion in cash and stock, said it will not sweeten its bid for Unocal -- at least not yet.

"We're satisfied with the bid we have on the table," Peter Robertson, Chevron vice chairman, said in an interview on CNBC. "We think it's still the best opportunity for the shareholders."

Unocal said Wednesday its board will consider the CNOOC offer. The company, based in El Segundo, Calif., said it had no new comment on the bid Thursday.

But Thursday it was clear any deal with CNOOC would have significant regulatory hurdles to overcome, not least of which is whether the deal would threaten national security.

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.

The Maytag deal, announced earlier this week, also involved a Chinese company coming in with a higher bid for a company that had already announced a deal. In this case, Chinese appliance maker Haier Group and two U.S. private equity firms offered $1.28 billion for Maytag, even though Maytag agreed last month to be bought by a group led by Ripplewood Holdings. Maytag says it is considering the Haier consortium's offer.

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.

Rep. Richard Pombo, R-Calif., chairman of the House Resources Committee, said in a statement that a Chinese purchase of Unocal would not be in America's best interest and 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."

Treasury Secretary John Snow said during a Senate hearing Thursday that an investigation of any sale of Unocal to CNOOC is hypothetical until there is an actual transaction, but he indicated that the government's Committee on Foreign Investments in the U.S. likely would be called on to investigate any deal.

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."

Associated Press reports were used in this story.

Join our mailing list

Latest Publications


The Betrayal of American Prosperity.


The Trans-Paific Partnership and Japan.


Making the Mexian Miracle.


Industrial Policy and Rebalancing in the US and China.


The Evolving Role of China in International Institutions.

 

Contact us

Economic Strategy Institute

1730 Rhode Island Avenue, NW, Suite 414 |  Washington DC  |  20036
Ph (202) 213-7051  |  Fax (202) 965-1104  |  info@econstrat.org