CHINA / Foreign Media on China
China and the dog that didn't bark
(latimes.com)
Updated: 2006-04-24 16:00
In the old days, Chinese emperors sat in splendor in the Forbidden City
and waited for the barbarians to come to them. That only changed in 1979,
when Deng Xiaoping turned Chinese history on its head, becoming the first
leader of the People's Republic of China to visit the United States ��
the first emperor to pay court to the barbarians.
In 1979, it was a novelty to see the pint-sized heir of Mao donning a
10-gallon hat. Now, however, when President Hu Jintao visits Washington,
he is treated with the respect due an equal.
But is he truly an equal? The answer is more "yes" than "no."
True, the annual output of the American economy is still more than six
times larger than that of China when measured in dollars. True, the
average American is about 30 times richer than the average Chinese. Yet
China's economy is growing at a rate two to three times that of the
United States'.
Moreover, the U.S. and the renascent Chinese empire have become deeply
interdependent. The U.S. is currently running the mother of all trade
deficits, equivalent to about 7% of GDP. A large part of that deficit ��
more than a quarter �� is being financed by China in the form of
purchases of U.S. bonds. Why do the Chinese want to accumulate so many
dollar-denominated securities? Because it prevents their currency from
appreciating against the dollar and keeps their exports cheap. As China's
share of global exports has surged from 1% to nearly 8%, access to the
American market has been crucial.
So China may be a rival in some respects, increasingly competing with the
U.S. for access to the world's reserves of oil and natural gas. But it is
also a vital prop of American prosperity, financing the American
borrowing habit at a remarkably reasonable rate of interest.
The catch is an inexorable relocation of manufacturing from West to East.
Just look at the things Americans import from China. Don't kid yourselves
into thinking it's just toys and sneakers, because Chinese exports have
been racing up the value chain in recent years. In 2003, for example,
more than two-fifths of the U.S. trade deficit with China was accounted
for by electrical machinery and power generation equipment. Virtually no
new jobs are being created in manufacturing in the United States these
days; American firms would rather outsource production to Asia.
And this is where the Sino-American relationship gets really interesting.
Because, if history is any guide, we currently ought to be witnessing a
wave of China-bashing in the United States.
Of 12 senatorial elections that look to be competitive this November, no
fewer than nine are in states with substantial industrial sectors. And
yet, to judge by their websites, not one of the candidates is willing to
play the anti-China card. The nearest anyone comes to raising the issue
is the anodyne phrase "fair trade."
What makes this especially puzzling is that, for two years running, Sen.
Charles Schumer (D-N.Y.) has toyed with the idea of legislation that
would slap a whopping tariff on Chinese imports in retaliation for
alleged Chinese currency manipulation. Why is this idea not seen as a
vote winner?
It wasn't like this in the 1980s. Then, American fears of Japanese
competition unleashed a wave of Japan-bashing and punitive tariffs. So
what's different this time? One answer is that the trade traffic is not
all one way. There has been significant growth in U.S. exports to China,
albeit not on the scale of Chinese exports to the U.S. Another answer is
that American consumers are just too happy with cheap Chinese imports to
complain about the erosion of the American manufacturing base. A third
possibility is that the Chinese are now using some of their accumulated
dollars to invest in the U.S., thereby creating new jobs.
But perhaps the best explanation is that American voters just don't see
China as a problem. Polls make it clear that issue No. 1 is Iraq (22% of
voters see it as the country's top concern). Only 10% of voters give
first place to the economy, and just 7% cite unemployment. The trade
deficit is nowhere.
Does this mean that Americans have learned from history not to resort to
protectionism when they encounter competition? Perhaps. But another
possibility is that the urge to bash China is merely dormant. After all,
85% of voters do regard "protecting the jobs of U.S. workers" as the No.
1 goal of American foreign policy. And the recent storm over immigration
has shown how readily members of Congress will strike protectionist
attitudes when they see an opportunity to make political hay.
A few years ago, Schumer asked a nice question at a Senate Banking
Committee hearing: As more and more manufacturing jobs move to China,
"what's going to be left here, restaurants?" My hunch is that more and
more of his fellow legislators could soon start asking similar questions.
At this point, China-bashing reminds me of Sherlock Holmes' "Curious
Incident of the Dog in the Night-time." But the dog did nothing in the
night time, Watson objects. "That was the curious incident," Holmes
replies.
It will be even more curious when it starts barking �� though let's hope
it has the courtesy to wait until the emperor is safely back in the
Middle Kingdom.
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