U.S.-China Trade

An open, public hearing is being held by the US-China Economic and Security Review Commission* in Washington on May 20, 2008. The topic of the hearing is “China’s Proliferation Practices and the Development of its Cyber and Space Warfare Capabilities,” and seeks to collect and share information from academic, industry, and government expertise to identify and determine economic and security impacts occurring as a result of the US’ bilateral trade partnership with China.

This fifth hearing in a series of public hearings will cover the following activities taking place in China:

• proliferation activities
• growing cyber space activities and capabilities
• growing presence and capabilities in outer space

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* The Commission is mandated by Congress to investigate, assess, evaluate and report to Congress annually on “the national security implications and impact of the bilateral trade and economic relationship between the United States and the People’s Republic of China.'’

 
[Beijing’s Bird’s Nest, under construction in preparation for the 08 Olympic Games]

. . . while we undergo some (re)construction.

Please stay tuned!

Stan Abram’s China Heresay blog led me to this James Fallows’ article for theAtlantic.com, recounting his personal experience in China with middle school girls, who he describes as “charming” and “open-spirited.”

A reminder that despite its unfortunate portrayal as a looming military and economic threat, China is doing its best to address domestic concerns, be it managing its massive and aging population, equally distributing wealth between cosmopolitan and rural populations, or staying current in this information age.

Prime Minister Helen Clark of New Zealand, left, and Prime Minister Wen Jiabao of China  after the signing ceremony at the Great Hall of the People in Beijing. (China Daily/Reuters)

China and New Zealand have signed a free trade agreement, effective October 1st, marking the first concluded agreement China has signed with a developed country. Talks for this agreement were put in motion in 2004 when NZ granted China market-economy status, a contingency prospective traders must fufill before becoming eligible to negotiate a free-trade pact. (The EU and US still classify China as a nonmarket economy, enabling enforcement of penalties on Chinese goods that are exported at a cost lower than rates of production).

The agreement situates each country to benefit by exporting goods on a tariff-free basis. NZ will phase out tariffs on all Chinese imports by 2016, and China will follow suit by reducing tariffs on 96% of all NZ imports by 2019. The free trade agreeement also provides coverage for trade in services between countries, from insurance and banking to education and labor supply. New Zealand issued a statement, saying “The upfront commitments on goods, services and investment and the mechanisms which provide for further development of the agreement over time should help keep New Zealand at the fore front of the evolution of trade and investment relationships with China.”

One facet of this agreement focuses on sharing eco-friendly best practices, as China seeks to learn carbon emission reduction techniques from NZ in an effort to become proactively involved in climate change. As agricultural products make up nearly half of NZ’s exports to China, it presents the opportunity to educate a growing country on harnessing its assets in an environmentally productive fashion.  

As it relates to China’s position in the global trade community, the success of this agreement has the power to influence Chinese deals with Australia and other countries looking for a similar arrangement.is in the process of authoring 6 more trade agreements, including trade partners Australia, Peru, and South Africa.

The conclusion of this agreement grants NZ expedited, direct access to China’s growing economy, which will only grow as the door swings open and more countries jump on the bandwagon. China is becoming more competitive with the US’ trading stance by enlisting its own bilateral trade partners. NZ’s Clark is reportedly receiving flack for concluding this agreement with China concurrent with China’s controversial human rights conflicts.

China will be setting up shop in Kathmandu April 25-28, driven by Nepal China Executives Council (NCEC) and the PRC Embassy in Nepal to educate the Nepali people on modern machinery, automobiles, electronics, medical and agricultural instruments, and home appliances.  Nepal looks to learn, by China’s guidance, how these industries have propelled successes in China’s tourism and economy. This is the third trade show in a series that began in 2005 to mark the establishment of diplomatic relations between Nepal and China.

The event will give Nepal and China the opportunity to examine strengthening a trade partnership. Nepal will assess the quality of Chinese goods and gain information on the business of production and trade. Chinawill exhibit its products and determine scopes of investment.

Nepal-China trade relations have grown in recent years. One notable milestone being tariff-free treatment of Nepali goods in the Chinese market. China has provided Nepal with “financial and technical assistance” in support of arenas such as infrastructure growth, industry establishment, and human resource development. The government of Nepal’s Ministry of Foreign Affairs measures the volume of such assistance to the tune of “80 million Yuan every year.”

Interestingly, the 2005 kick-off trade fair was jointly launched by Nepal and “China’s Tibet.” The 2008 affair comes at the heels of a whirlwind surrounding the controversey of China’s Tibet crisis: “More than 20,000 exiled Tibetans have been living in China since fleeing their region after a failed uprising in China in 1959.” Nepal continues to support its trade relationship with China, and has yet to issue a statement regarding the crackdown of protestors in its capital city.

(Hummer H6 Player Edition is a $103,000 “Super SUV,” six-wheeled with a horse power of 325hp and torque of 365 lbs-ft)

Darfur and the Olympic games. China is a key player in both, but rather than throwing a blanket over both issues to determine cause-effect and prescribe a solution, we need to be more careful about how we are classifying these relationships.

East vs. West Models of Economy. The Chinese model of market-based economic development has always been a “natural, inward-focused growth as opposed to the unnatural trade-driven growth of Europe, which relied on the expropriation of the raw materials of the rest of the world.*” Although China has benefited from the exploitation of subordinate classes and countries, it achieved as much merely playing to the level of the league it was drafted into. 

During the Mao era, China experienced social achievements, particularly in literacy and healthcare, that worked to lay the foundation for the economic growth the country has recently experienced. Before the late imperial China was defeated and forced to open its doors to trade with West, China’s economic strategy was based on self-improvement and sought growth organically, from what its own soil had to offer. 

Once strong-armed for its tea, silk, and porcelain, these assets have long since been replaced with manufactured goods, cheap labor, and oil. Western colonists have been credited with introducing industrialization to East Asia, but now China is to blame for pursuing the resources it needs to sustain the survival of its people, and the growing demands of world.

I can’t help but feel that China is acting as a natural global stabilizer, passing down savings to poorer nations who cannot afford to support the luxuries and extravagance of the American way of life. Since its economic rise, China is able to offer poorer societies attractive alternatives to trade and investment*.

Currently, as China works with Sudan to secure an oil stream from the Gulf, Americans are quick to cry foul, label the 2008 Olympics as the “Genocide Games,” and attribute China’s boom to a “Red Storm Rising.”

The Oil Crisis. Just as the US taught China to find success as a globally-competitive trader, it could take the time to educate China on prioritization of human rights and energy trade. How is the US presence in Iraq any more forgivable than China’s interest in Sudan? China’s reason for its relationship with Sudan is no more obscured than the ambiguity surrounding why American families are still missing their husbands, mothers, brothers, and daughters.

On top of its link to Sudan through arms and oil, China is securing liquid gold that the US is losing out on. By aggressively seeking out oil sources in Africa and the Middle East, “with countries hostile to the United States, such as Iran and Sudan,” Americans are armed with all the reason in the world to chastise China for edging out the US for oil resources / trading with frenemies / usurping its position as World Economic Leader enabling genocide activity in Darfur.

Not to mention that the economic impact a growing China has on American income has been predicted to be surprisingly modest (imports of oil are still less than 4 percent of national income*), given the US propensity for increasing its income through technological advance. Moving forward, this means that assuming that oil prices double and Americans continue to burn through oil at the same rate, the hit to the American economy is recoverable in less than two years of normal growth.

On average, Americans consume the equivalent of six gallons of gas per person per day. Americans also drive comparably large cars (some of them de-commissioned military luxury vehicles) and air-condition enormous homes (at an average of 900 square feet per child)*. These are the same Americans that are responding to a poll in the Washington Express, which asked “Should the US boycott the Beijing Olympics to protest human rights violation?” 55% of the respondents answered yes.

The Olympics Games. President Bush, British PM Gordon Brown, and French President Nicolas Sarkozy are all confirmed to attend the 2008 Olympic gala opening ceremony on August 8. Political leaders themselves are refusing to politicize the games in the interest of the Olympic spirit.

Outside of the obvious hypocrisy (the US will trade with and borrow from China, but it draws the line at a footrace?), I hardly think it fair to penalize the world’s best athletes who have trained to compete at an event couched as a juncture for global celebration.

According to NPR, a survey of almost 5,000 Chinese shows that support for candidates is divided as follows:

Clinton - 60%
Obama - 24%
McCain - 7%

The clip explains that Hillary is favored simply because she is the most known.  Let us not forget her address at the 1995 UN World Conference on Women in Beijing.

Listen here for the broadcast.

(Adalberto Roque / Agence-France Presse)

The timing of it all! With Castro out and the prospect of a waning trade embargo in a new American administration, Beijing stands a
little taller this spring.

It is openly noted that Raul Castro is ready to replicate China in planning for Cuban economic reform, an extension of Fidel’s
fascination with “Chinese style socialism.” China is glowing in its new role as mentor, and has been hazily whispering sweet nothings about Cuba to the media on its steadfast appreciation for the country: ”China and Cuba are friendly nations. The Chinese side will continue to consolidate and develop Sino-Cuban friendly and cooperative relations.”

Fidel’s departure is the first domino in a series of events. Its economic isolation provided the island country with time to ripen with
resources. Now, it seems, everyone is quivering with excitement at the opportunity to own and drill on a piece of the Gulf of Mexico. With  China as lead comrade on the VIP list (and more in queue), Cuba is poised for significant  foreign investment deals. Deals that will be
neatly stacked on top of business generated from Cuban expatriates, leveraging agricultural resources for ethanol, and its well-educated people – if played correctly.

And still, China wins. On top of being supremely situated for a stake in the Gulf, its relationship with (and investment in) Cuba makes for
a careful US, whose attention is already divided among its presence in the Middle East, the upcoming election, and narrowing its trade gap with China. Among its other 123984719562734 priorities. 

Spielberg: 1
China: 1 *

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*No but for serious, the allegations surrounding China’s involvement in Darfur’s genocide activities are grave and require serious attention. I have been thinking on how to frame this discussion and intend to post on it, very soon.

For US-China Trade’s first-ever cross post, I am excited to vehicle this article by Rich Basas (blogger for FPA’s Latin America blog, and co-blogger for the Migration blog). He compares patterns of economy between Brazil and China and parallels their struggle with growth and unequal dispersion of wealth.

FPA sent me a link to an article opposing the theory that the trade imbalance between China and other major players can be resolved by a stronger Yuan. David D. Hale and Lyric Hughes Hale frame the problem as one larger than the imbalance between China’s exports and the weakening US economy: “The greater and far more critical challenge is to properly complete China’s integration into the global economy.”

Instead, they suggest taxation reform, restructuring of corporate/banking sectors, gradually opening capital accounts, and helping along domestic consumer spending. This idea puts a positive spin on the trade deficit by focusing on additive measures, rather than those working to negate current economic circumstances. The point here that I find most compelling is their refusal to deny the pros that have resulted from China’s trade surplus. . . US companies outsourcing production costs to China have been exceedingly profitable, and those dollars the People’s Bank of China buys up is helping to soften the blow of an indebted US economy. And let us not forget that the televisions and clothes assembled and manufactured in China are much more attractive to the average consumer.

All this reminds us of the progress that has been made thus far, economically, and in state relations. Granted, there is still much work to be done, but leveraging current platforms for coordination such as the Strategic Economic Dialogue series is an encouraging way to approach resolution. A renewed sense of optimism goes a long way.