Changing Our Dysfunctional Relationship with China
With Chinese President Hu Jintao’s state visit, it is a good time to reflect on how the dysfunctional U.S.-China relationship has developed, and to consider why it may be time for a trial separation. For nearly 40 years, the U.S. and China seem to have modeled their partnership on Sid and Nancy.
President Nixon opened relations with China as a strategic move during the Cold War. What he opened, in fact, was a can of worms, as China now possesses stealth fighters, satellite-destroying missiles, and economic clout that put the Soviets to shame.
But Nixon was not the last President to make miscalculations with regard to China. The tepid, brief response of President George H.W. Bush to the Tiananmen Square massacre meant the Chinese regime suffered only minimal consequences for its brutality. President Bill Clinton’s change of heart on linking Most Favored Nation trading status with China to its human rights record gave China a blank check throughout the 1990s.
Moreover, in what some historians may mark as one of the most serious blunders of the post-World War II era, President Clinton’s team negotiated an exceptionally weak deal when China entered the World Trade Organization. The U.S. agreed to lower tariffs on Chinese products, end its annual trade-linked review of China’s human rights record, and diminish many of trade enforcement options. In effect, the deal tied America’s hands even as China’s economic power—and mercantilism—expanded.
President George W. Bush, with a mounting Chinese trade deficit, denied every single petition for relief from Chinese import surges filed by American industry. So, for the first eight years of China’s entry into the rules-based trading system, China wasn’t asked to follow the rules. Cheating became endemic.
Enter President Obama, who spoke forcefully about China’s currency practices during the 2008 campaign. He criticized the terms of China’s entry into the WTO. To President Obama’s credit, his administration has stepped up trade enforcement. But at this point, with a $270 billion annual trade deficit with China—resulting in 2.4 million lost manufacturing jobs or job opportunities to China—trade enforcement is akin to putting one’s finger in the dike. And, the Administration still refuses to cite China as a currency manipulator, an omission that defies both logic and good sense.
After more than two full decades of polite diplomacy, it’s time for America to consider another approach, because this approach is clearly not working. And the American people are ready for such as change.
As I said last week, the rise of China has made Americans deeply uncomfortable, yet the public sees very little attention to this concern in Washington. In the current political environment, we really have no answer to the rise of China, when, in fact, it should be an issue that unites Americans to a common purpose.
While we dawdle, China dawns. China will file more patents this year than America. China may, in fact, pass the U.S. to become the world’s top manufacturing nation this year; it is a title we have held for 110 years running. China now has the world’s fastest supercomputer and $2.78 trillion in foreign currency reserves.
The lesson here is not to emulate China, nor to blame the Chinese people, who suffer under an autocracy. Many of China’s economic gains are ill-gotten. Its mercantilism could wreck the global economy again. Its political oppression shows no signs of abating. Its military has alarming designs on the Pacific Ocean.
When China is not playing by the rules, we must call them on it, through aggressive trade enforcement and clearly defined consequences for Beijing if it does not revalue its currency in a meaningful way. We must be careful not to enrich the regime in China any further, which means lowering our staggering trade deficit with China. If China refuses to honor its commitments, we should consider, as Paul Krugman suggests, erecting a steep, unilateral tariff until China does comply. Ultimately, China needs access to the U.S. market more than we need China’s debt financing.
I doubt that President Obama can change the dynamic during this state visit by President Hu, but he must start. We cannot rewrite our history with China. But, we can change its arc.
This blog is cross-posted on The Huffington Post.
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