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.
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1st, apologise for past China bashing.
2nd, promise to work with China to stem spread of terrorism as taught and exported from Tora Bora terror camps in Afghanistan. Agree to return to China the Uighur terrorists for a promise they will not be tortured and an agreement to share information on the growing threat to Pakistan.
3rd. Apologise for covert US support of free tibet and Dalai Lama, and promise to work together to solve water resources challenges.
4 Agree to work harmoniously with China to develop a multitude of solar energy solutions, including individual solutions for private homes, as well as for large installations for factories.
5. Set up teams to explore co-operation with China for research at both the No and So poles, as well as the posibility of working together on space programs.
6. Set plans to develop education ties, especially math and science curriculum development.
7. Applaud China for progress made in advancing womens rights.
8. Applaud China for advancing minoritie rights, effective affirmitive action and representation. Set joint planning teams to R&D plans for further expansion of minority rights and representation both in US and China. Include bi-lateral reporting between the two countries.
9. Discuss agricultural R&D esp high altitude foods, and non food fuels.
10 Promise not to sell more military arms to Taiwan.
while European markets are in symbionts with american markets..........
as goes america so goes the world, its not arrogance, it's fact......................
I realize this will change over the course of the next 50 years, as the wealth stolen from 1000 years of European (and its inheritors, the Americans) colonialism is redistibuted back the the "third world"
but for now, that is just how it is............
I dont think china will have a large enough internal market to sustain itself for a long time.....
In addition, if the big three, have outsourcing and cutting US manufacturing in their plans for viability, then there should be no bailout money. The only remote reason for giving these losers money would be to keep manufacturing here in the states. They should not be allowed to be a US headquartered company as opposed to a US manufacturing company.
"The saving rate [in America] is zero," says Stiglitz, " that means that you have to finance [the Iraq war] by borrowing from abroad. So China is financing America's war." The US in now operating at such a deficit, in fact, that it doesn't have the money to bail out its own banks. "When Merrill Lynch and Citibank had a problem, it was sovereign funds from abroad that bailed them out. And we had to give up a lot of shares of our ownership. So the largest shareowners of Citibank now are in the Middle East." This creates a precedent of dependence, "and whether we become dependent on the Middle East oil money, or Chinese reserves - it's that dependency that people ought to worry about. That is a big change. The amount of borrowing in the last eight years, on top of the borrowing that began with Reagan - that has changed the US's economic position in the world."
I don't think China is losing any sleep at night about a visit from Hillary Clinton.
The extreme indebtedness of the US to China and the Middle East gives us leverage over them. They absolutely cannot afford for us to go under; hence in their own interests they will continue to finance our financial shenanigans.
"The answer: It's in their strategic interest to finance a war that drains America's financial, military, and leadership clout. They're paying for us to screw ourselves. It saves them the trouble.
We're still important, a big economy, a player. We're still dangerous, with all our bombs and missiles. But we won't be fighting another ground war anytime soon, and everybody knows it. Financially and militarily, we're no superpower anymore – though no presidential candidate can say that. Whether we recede from center stage gracefully or destructively, we'll recede. We already have. It doesn't look that way on TV, but we already have."
This is why China isn't losing any sleep about Hillary Clinton's visit and this is why the US needs to increase its savings rate, and direct its expenditures back into the American economy where it can help make some kind of dent in our massive debt and start to get us out of the position of financial dependency on foreign sources.
whats your opinion about the populist protectionist attitude rising in america....
I told a developer two years ago that it was inevitable....
I would have never let our trade imbalance get so lop-sided in the first place, wal-mart turned into a distributor for chinese crap, at the cost of american jobs......
I learned in economics in the 90's that we didn't have to make anything here, we would sell ideas to the world, when I reminded the prof. that the british already tried that, I was basically told to shut up....
Based on what laws of nature or economics theory?
"...which, for some has been disasterous...."
In a country of 1.3 billion people the phrase "some" means very little. Overall China is still growing strong and it is meeting the challenges it is burdened with by its history. That's way more than can be said about the US.
"whats your opinion about the populist protectionist attitude rising in america...."
It's a populist attitude, you said so yourself. It's neither based on facts, nor realities. And since China will transition shortly from an export driven to an internal market economy, the relevance for the Chinese is probably smaller than for US. They will find ways to adapt without some of our markets. It's by no means sure that we will be doing well without their cheap products.
"I would have never let our trade imbalance get so lop-sided in the first place"
Our trade imbalance with China was $266 billion last year. For comparison sake, we imported oil for roughly $500 billion. I would say Chinese imports are not our main problem. Our oil dependence is.
"I learned in economics...."
The British Empire needed the colonies as EXPORT partners just as much as it used them to import natural resources and cheap goods. Please read up on Ghandi and "homespun".
America became a superpower because of WW II and its control of key technologies, first and foremost nuclear weapons and delivery systems. Its middle class had little to do with that, except, of course, that it runs the military industrial complex while it leaves the lower ranks of the military to the working class. It's way more lucrative to make the weapon than to use it.
China never made an attempt to control the world with advanced weaponry. Unlike the US it was never expansionist in its history and is not showing any signs of being expansionist now.
Globalization exists at least since antiquity. Roman aristocrats were wearing silk from China without even knowing where it came from. Globalization ruled the economy of medieval Europe and the time of the Spanish, Portuguese and British Empires. It's hardly new.
The working conditions of US workers are nowhere close to those of many workers in China. There is absolutely no comparison. One does wonder, though, why Americans dream about competition for these jobs while the Chinese are constantly trying to replace them with increasingly better ones. They race to the top while globalization foes in the West seem to believe that we have to race for the bottom at any cost.
events that repeat themselves in the same
way everywhere. China's "labor movement stage" is
the rise of the communist party. They are already
way past what you are talking about."
Incorrect, we are talking about China's economic evolution in the "free market", the Industrial revolution was followed by labor movements in Europe as well as the US. China has large number of workers who get paid next to nothing, with no benefits. They are pre-labor movement. The US labor movement occurred in the late 1800's. It is apparent that some people hear the word "labor" and they immediately draw conclusions based on what they know of modern day unions. It would be good for many to go back and review that bloody period in American history.
Henry Ford said that by paying his workers well, he was creating customers for his product. He could have pocketed a larger percentage to pass on to his heirs but it worked out better for him to have people who could by his product.
We are talking about America becoming and economic superpower, not military. America did not become an economic superpower because of it's nuclear arsenal. Yes the govt spending of WWII fueled the economy but that war ended in 1945.
Currently globalization is currently implemented as a way to get around the labor movements of the past. The free trade agreements have to be better structured so that all can benefit.
Good luck with that.
"Our dollar needs to drop so that it will be unprofitable for U.S. corporations to go to China ."
If the Dollar drops even more soon enough the smartest Americans will go to Europe and China to work there. If you see your salvation in becoming a third world country, just so you can compete with the fastest developing nations, you have a severe lack of economic problem solving capacity.
"As a result, they will have to come home and provide needed jobs here."
Why would they need to come home? They can find plenty of other places to make money at.