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Hillary Clinton Visits China: What Should Be On The Table

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It makes perfect sense that China is one of the first countries Hillary Clinton will visit as Secretary of State -- except, perhaps, to the Chinese, who await her arrival with no small degree of concern. Yes, it's our largest trading partner; yes, China will be a centerpiece of Secretary Clinton's brief in the next four to eight years. But the Chinese also understand that Obama Administration is likely to take a significantly different approach to the trade relationship with China than did the Bush Administration.

The significant differences between the two administrations' approach to this relationship create unsettling uncertainty on the Chinese side. And from the American perspective, it's critical that Secretary Clinton not repeat the mistakes of Henry Paulsen, who as Treasury Secretary and Bush's China point man, turned out to be a very poor negotiator, and bartered away virtually unfettered access to U.S. markets without making any progress at all on key trade issues like the environment, intellectual property and product safety.

Clinton will be arriving in China in moment of rare Chinese weakness and self-doubt. Many in the West believe that China is well on the way to emerging as a prosperous global superpower, but the truth is that China's rise is far from inevitable - and the global financial meltdown has revealed some of the country's deep cracks and fissures. The U.S. is facing a challenging economic climate, but we're having a field day compared with how the financial crisis has affected heavily export-dependent China. It's hard for us in the West, preoccupied as we are with our own economic problems, to understand the impact of the financial meltdown on China, but the consequences have been far deeper and more destabilizing than most of us realize.

According to Chinese government statistics, 35 million non-farm workers are already unemployed, and this number is predicted to rise to 50 million, or 10% of the non-farm workforce, by the end of this year. To put that number into perspective, consider that the Department of Labor recently reported that the U.S. has shed 3.6 million jobs in since the crisis began in 2007.

Because China has known nothing but double digit growth for thirty years, the coming economic slowdown is going to place enormous stress on their political and economic system. It will inevitably lead some within China's leadership to question the country's commitment to free trade and the WTO. Therefore, the conventional wisdom correctly advises that Secretary Clinton must reassure China that America will not close its markets to Chinese goods. At the same time, however, Secretary Clinton should bear in mind that the themes she raises during this trip will irreversibly shape the course of this relationship in the next eight years, and that this crucible of crisis is the best time to begin to get right some of the things the Bush administration got wrong. Most importantly, the current context makes it easier to convey the extremely sensitive message to China that free trade must be fair, safe, environmentally sustainable and based on existing WTO rules.

A call to make international trade safe, fair, and economically sustainable will doubtless open the door to accusations that Secretary Clinton is taking a protectionist stance -- but nothing could be farther from the truth. Even in the midst of this crisis, it would be a huge mistake to forget what we have learned the hard way over the last two decades of unprecedented trade growth: The drive to expand trade must not come at the expense of fairness, and international trade needs to be fair, safe, and environmentally sustainable if it's going to deliver true economic gains.

It's become too easy to paint trade issues with the broad brush of protectionism. In the recent Economist cover story "Return of Economic Nationalism," the author lumped together as protectionist a litany of diverse initiatives from the undeniably protectionist "buy American steel and iron" provisions in the U.S. stimulus package (thankfully watered down in the final bill) to the debatably protectionist lending restrictions imposed on European banks by their governments to a not even remotely protectionist statement by Secretary of the Treasury Tim Geithner in which he baldly asserted that China was manipulating its own currency. While his comments were more confrontational than China - and China-watchers - are used to, it's not protectionist in the least; Geithner was stating the truth, if in a somewhat aggressive way designed to place China on notice that the Obama Administration intends to approach trade with China far differently than the Bush Administration.

So what should be on the table when Secretary Clinton discusses trade with Chinese officials? First, she needs to have a long overdue conversation with China about product safety. Active pharmaceutical ingredients are the most dangerous and high-profile Chinese exports, but many other Chinese exports also have proven to be dangerously defective. Last year's heparin recall, which resulted in over 80 deaths in the U.S alone, was merely the latest in a series of highly-publicized incidents involving toys, tainted toothpaste and even toxic pet food, which sickened or killed thousands of dogs and cats. In August 2007, Mattel recalled nearly a million toys made in China that were decorated with lead paint. In the past decade there has been a steady rise in product recalls almost wholly attributable to the corresponding rise of Chinese imports in that period. The Consumer Product Safety Commission reported that 61 percent of the 473 products recalled in the United States in 2007 were manufactured in China.

China itself has suffered the worst consequences of lax safety standards and enforcement. Just this past winter, more than 300,000 Chinese children were sickened, and at least six died, as a resulted of consuming milk deliberately laced with the industrial chemical melamine, which is used in manufacturing plastic products but also creates a false positive for protein testing. If China is to continue expanding its economy, it needs to recognize that the world is not going to buy Chinese manufactured value-added products like pharmaceuticals, automobiles, and jet airliners unless they are safe and of high quality. If Secretary Clinton delivers this message to Chinese officials it's not "protectionism" -it's a crucial dose of reality for a country that wants to step up in global manufacturing class.

Secretary Clinton also needs to deliver a clear message about the role of environmental sustainability as it relates to international trade. In addition to high domestic pollution levels, China's manufacturing results in high CO2 emissions and other environmental hazards that have consequences for the rest of the world. China years ago passed the United States as the largest CO2 emitter, and is responsible for over two thirds of CO2 emission increases. Moreover, its lax environmental standards also result in a significant trade advantage to China, and are another reason China's products have been cheaper and thus more attractive in global markets. Environmental sustainability is a touchy issue for China because China believes its status as a developing nation entitles it to relaxed environmental standards. Many will also argue that it is wrong to focus on environmental issues in the midst of a global economic meltdown. But the sheer volume and scale of China's carbon footprint make it imperative that Secretary Clinton speak forthrightly about this issue.

Attempting to reconcile China's trade and development goals with the goal of achieving safe, environmentally sustainable, and fair trade is bound to create a difficult negotiating climate for the U.S. and China during the next 4-8 years. Nobody can realistically expect Secretary Clinton to resolve these issues during this first trip to China. Instead, she can convey to Chinese officials that from now on, these issues are on the table.

Next week, we can assess how successful Secretary Clinton was in conveying the message of fair trade on her trip, and, more interestingly, the Chinese reaction to her visit.

Michael A. Santoro is an Associate Professor of Business Ethics (with tenure) at the Rutgers Business School. He holds a Ph.D. in Public Policy from Harvard University, a J.D. from New York University, and an A.B. from Oberlin College. His book, China 2020: How Western Business Can--and Should--Influence Social and Political Change in the Coming Decade will be published by Cornell University Press in May 2009. Prof. Santoro's first book Profits and Principles: Global Capitalism and Human Rights in China was widely praised, and in April 2000 Prof. Santoro testified before the United States Senate Finance Committee on the human rights implications of China's entry into the World Trade Organization.

Wendy Goldberg is an Internet industry communications and policy strategist based in New York City. During President Bill Clinton's first term, Goldberg served in the Small Business Administration, which was at that time a Cabinet-level agency. She has a Masters Degree in Public Administration from the Harvard Kennedy School.