(U.S., China trade war article updated for Geithner comments on currency war, House vote and poll findings)

NEW YORK ( TheStreet) -- Recent rhetoric in the war of words between the U.S. and China over currency control and China's export advantage has reached a high point.

The United Steelworkers Union filed a petition with the U.S. government alleging that China's support of its green energy industry amounts to a violation of international trade law.

At a recent Senate hearing, Treasury Secretary Tim Geithner fended off the rhetorical salves from senators over why the U.S. government hasn't done more to pressure the Chinese on the currency issue.

Geithner followed up the China currency war discussion on Wednesday during a speech at the Brookings Institute, without mentioning China by name. Geithner said, "For too long, many countries oriented their economies toward producing for export rather than consuming at home, counting on the United States to import many more of their goods and services than they bought of ours.... Countries overly reliant on exports to us for their own growth will need to change their policies.... Countries that chronically run large surpluses need to undertake policies that will boost their domestic demand."

Geithner said the issue will be among the most important at the upcoming G20 meeting, though the Treasury Secretary has been making that statement since September.

Finally, the U.S. House of Representatives voted last week to give President Obama the authority to slap an import tariff on Chinese products. Of course, the measure is aimed at placing a tariff on products from "countries with undervalued currencies" but everyone knows that there is one country in particular that congress is interested in penalizing.

China's message in response to all the rhetoric has more or less been, "we don't bow to pressure from foreign governments, thank you very much. We've got the currency situation under control."

The message from corporate America to those in Congress pushing the anti-China rhetoric and voting for the tariff measure has been, more or less, "back off or you may screw up trade relationships we've worked hard to get."
Vote Now on the U.S./China Trade War
Should U.S. Corporations Bow to China?

Chinese vice commerce minister Chen Jiao reacted to news of the congressional vote by saying, "We'll make a decision based on our own economic development levels and the world economic situation. If it takes the yuan to appreciate for our economy to develop, we will do it even though it would have negative impact, but it is redundant for the U.S. congress to pass the proposal."

U.S. corporations aren't lining up to support Chen Jiao specifically, but they fear that the Congressional action is counter-productive. The argument being made is that any action taken by the U.S. government could lead to retaliation against Western firms seeking to conduct business, or already conducting business in China. Additionally, international trade experts argue that negotiations with China have been going well, and this congressional vote is the last thing the business world needs. This fear has been cited as one reason why it was the United Steelworkers, and not the green energy industry itself, that lodged the trade complaint against China alleging unfair trade practices.

The American Chamber of Commerce stated this fear plainly on behalf of its member companies last week. Member companies with business in China include General Electric ( GE), Baxter International ( BAX) and Citigroup ( C).

Critics say the congressional rhetoric is its own worst enemy. Foreign pressure on China to revalue its currency will only serve to push China away from taking action. The emerging giant won't want to be seen as bowing to international pressure.

It seems from the American Chamber of Commerce's negative reaction to the congressional vote on a Chinese import tariff, it is ready to bow to China rather than vice versa.

While big business is against the China tariff, the professional class as a whole is not necessarily in agreement. The most educated, white collar residents of Main Street are, in fact, moving to a more reactionary position vis a vis free trade, based on the latest Wall Street Journal/NBC News poll.

More than half of those surveyed, 53%, told the WSJ/NBC poll that free trade agreements have hurt the U.S. The negative view of free trade was up from 46% when the survey was last conducted three years ago, and up from 32% in 1999.

The WSJ/NBC pollsters remarked that the most notable change in the poll is that the well-educated, upper income respondents are now moving more so into the anti-free trade camp. Roughly 50% of survey respondents with income of $75,000 or more think fair trade agreements are hurting the U.S., a doubling of the negative free-trade opinion among the well-educated since the poll was first taken in 1999.

The House vote on the China trade tariff received support from both sides of the aisle, too, with 249 Democrats and 99 Republicans approving it.

Another recent Journal poll found that when the issue was more squarely framed as an outsourcing of jobs issue, the reactionary stance was more pronounced. Approximately 83% of working-class survey respondents told the WSJ that outsourcing of manufacturing to foreign countries with lower wages was a reason for unemployment in the U.S. and a stagnant economy. Among the white-collar crowd, 95% of survey respondents voiced this sentiment.
Vote Now on the U.S./China Trade War
Should U.S. Corporations Bow to China?

If it's in the narrow interest of some big U.S. companies to bow to China over its currency control, is it in the best interest of the U.S., and market investors more generally? A healthcare investor holding shares of Baxter International might not want to see its operations in China penalized, but would the U.S. economy and markets as a whole benefit from a slap in the face of China's export advantage? Is a company like GE being selfish in telling the U.S. government to leave well enough alone when it comes to China?

An investor could look at the narrow sector example of alternative energy and find points to debate on both sides of the issue. A U.S. solar company like GT Solar ( SOLR) is garnering sales in China from the Chinese solar companies lining up to use its solar furnace technology. If GT Solar is creating jobs in the U.S. because China is buying its technology to support its growing green energy exports, should the United Steelworkers be crying foul about their job losses, or the congress looking at a tariff on Chinese imports that circle back around to GT Solar sales in China and jobs back home?

As in the case of GE or Citigroup looking to protect business interests overseas, U.S. solar and wind companies are looking for big business opportunities in China and might not want to rock the slow boat to China, so to speak. First Solar ( FSLR) is one example of a major U.S. green energy company hoping to gain a lucrative piece of China's green energy market. American Superconductor ( AMSC) has more or less become reliant on sales to China wind power leader Sinovel for its earnings.

Chinese green energy companies, like A-Power Energy Generation Systems ( APWR) are also preparing manufacturing jobs in the states. Chinese solar module companies Suntech Power ( STP) and Yingli Green Energy ( YGE) have been dabbling with plans to build U.S. plants also.

Of course, the move by Chinese firms to U.S. manufacturing may be a cold calculation of portions of their manufacturing operations that are cheaper to do locally for sales in the U.S., as opposed to a wholesale embracing of job creation in the U.S.

In the end, is the latest debate about China's economic policy and its impact on U.S. business simply the age old divide between politicians who always want to intervene -- or at least give the appearance of intervening -- and the free market corporations that prefer to let market dynamics settle issues. Do the corporations have a better understanding of global market forces than Senators up on their rhetorical high horses, or high daises in the context of the Senate hearing room where Treasury Secretary Geithner was recently grilled?

Who should bow to whom in the fight over China's control of its currency and export advantage? Take our poll below, and see what TheStreet thinks.

Who should bow to who in the fight over China's control of its currency and export advantage?

U.S. corporations are right to reject the China tariff idea.
China needs to be penalized for the good of the U.S. economy.

--Written by Eric Rosenbaum in New York.

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