The US-China Relationship: Only paper thin?

IT IS not always easy to tell whether the government of China is really, truly that angry when it tells the world that it is really, truly angry.

By Tom Plate

Published: Sat 7 Apr 2007, 8:27 AM

Last updated: Sun 5 Apr 2015, 1:06 AM

But lately China has been telling anyone who’ll listen that it’s furious beyond words with the US right now. The cause for Beijing’s dismay is the Bush administration’s move toward imposing hefty import taxes on incoming Chinese coated paper. The sulking out of Beijing is sullen and significant, even if somewhat stage-managed. This is because the Chinese appreciate that such US trade retaliation could spread from coated paper to a whole raft of allegedly subsidised Chinese imports.

The growing anger on the American side originates mainly with those industries who feel their products are undercut by China-originating plastic, steel and textile goods that are priced impossibly cheaply. These industries are well-represented by their well-paid pals in Congress, especially Democrats who, having won control of Congress just five months ago, are now drooling over winning back the White House.

Picking a fight with Beijing at this moment seems like a grand, no-lose idea to the Democrats. For all its economic advances, China remains a mainly repressive state that’s a poster icon for US human rights groups of all kinds —and these groups have members who wouldn’t vote for a Republican even if the GOP put up Abe Lincoln.

What’s more, the Chinese have stashed away the equivalent of over a trillion US dollars in reserve deposits, largely due to the fact that it peddles so much more of its stuff here than America does in China. Another issue is the Chinese government’s determination to keep the value of its currency lower than its market value. Among other things, this helps all Chinese exporters market their goods at lower prices in foreign countries.

It’s all very complicated. You can find experts, in the West and in Asia, who make strong arguments on all sides of these issues. Personally and professionally, I find the careful analysis of Prof Lawrence J Lau and his crack team at the Stanford Center for International Development the most persuasive. They have argued that the US actually benefits more from the trade imbalance because there is more value-added to the US economy from our exports to them, than for the Chinese economy from theirs to ours.

So the work of the Lau team makes you wonder why the Democrats would want to ruin a thing that’s good for the US. There’s another reason why the impending Democratic attack on China’s economic ways and means is bad news for America, even if it racks up lots of votes for the Democratic Party. The fact of the matter is that unless China self-destructs, it is well on its way to becoming a world power —no matter what human-rights groups on the left and neo-conservatives on the right want. The US can thus choose to work with the Chinese or choose to make an enemy out of them by going ballistic to every perceived inequity. “China’s efforts do not necessarily conflict with US interests,” writes Fletcher School professor Daniel Drezner in “The New New World Order,” a deeply thoughtful international overview in the current “Foreign Affairs” journal, “but,” he adds, “they could if Beijing so desired.”

The Bush administration, on the whole, has managed relations with Beijing about a billion times better than its fiasco approach to the Middle East. Alas, now it is the Democratic Congress that looms as the new unilateralist know-nothings. Travel almost anywhere in Asia and you will hear the same plea over and over again: Whatever you Americans do, don’t create unnecessary trouble with China. We don’t want to have to take sides and you don’t want the trouble the Chinese can cause.

Singapore’s Prime Minister Lee Hsien Loong recently put the matter to me in these sharp terms: “The trade deficit has become a political issue. It has been linked up with the exchange rate. Economically speaking, it doesn’t follow, but that’s the politics and you can’t unlink that. So that is a problem and if Congress pushes the wrong way, you can have a lot of rough weather as you did with Japan in the ’80s. But this will be much worse because China is much bigger and it’s a completely different relationship. The US can fight with Japan and it’s not going to be your enemy. But if you fight with China, that’s very big trouble.”

Iraq notwithstanding, America remains the world’s only military and economic superpower. But to keep that position, it needs to pick its enemies very carefully. If there’s one country that needs to be handled with care, it’s China. In a perfect world, the coated-paper threat would be thrown in the trash can of domestic politics. But the US presidential campaign has in effect already begun. Expect a lot more of this kind of nonsense —with some of it almost certainly coming back to haunt us.

Tom Plate, a full-time adjunct professor at UCLA, is a veteran US journalist

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