Treating China as an adversary is not in America’s interest

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A recent Gallup Poll reveals that favorable American public opinion on China has finally climbed over 50%, albeit just barely. This is a remarkable development in light of the continued barrage of negative sentiments from American politicians and pundits.

Politicians with national ambitions seem to need to attack China as part of their résumé. US Senator Elizabeth Warren is the latest example. It’s almost as if she took a trip to China just to criticize its human-rights record – and to earn a merit ribbon for her foreign-affairs credential.

Since she is supposed to be a progressive candidate for the American people, she could have spent her visit learning how China has taken hundreds of millions out of poverty and see if any of its techniques could be copied to help take Americans out of poverty – a domestic challenge in serious need of solution.

A common failing among political leaders in Washington is their being quick to criticize China while oblivious to gross human-rights violations at home.

Then there are those pundits who make a living by demonizing China. A glaring case in point is Gordon Chang, author of The Coming Collapse of China, published in 2001. In the US, he continues to get invited to pontificate in public. Outside of the country, his prediction of the collapse of China is seen itself to have collapsed.

Peter Navarro has run wild using Chang’s playbook and has produced books and documentaries that distort China and its trade policies based on exaggerations and outright fabrications.

Navarro’s colleagues at the University of California at Irvine can attest that he has no background or expertise on China. Professionally trained economists around the world look on his amateurish China-related writings with disdain. Even so, Navarro has ridden his China-bashing rhetoric to the inner circle of the White House.

Now that we are faced with threats of mutual economic disruption via a trade war, it’s time to weigh the costs and benefits of treating China as an adversary based on factual information instead of rants and exaggerated tweets.

Why China joined the WTO

China entered the World Trade Organization in 2001, having begun the application process some 15 years earlier. At the time, the size of China’s economy was less than 5% of that of the US. As a developing country, China was entitled under WTO rules to certain measures to protect its manufacturing industries.

The motivation for China to enter the WTO was to force its domestic industries to improve their manufacturing practices so as to compete in the global market. Contrary to implications from President Donald Trump’s announcements, being a member of the WTO did not give China any license to game the system.

Not without irony, it is the White House that is violating the US membership in WTO by arbitrarily and unilaterally threatening to raise tariffs against China.

In those early days, China insisted that in certain industries, for foreign companies to enter the country, the foreign company had to form a joint venture of which it owned no more than 50% and had to share the technology necessary for the JV to succeed.

That was China’s strategy to catch up by learning from the West. US companies did not have to enter the China market if they found those conditions unacceptable.

General Motors for one was very glad that it did. GM made more money on Buicks sold in China through its 50:50 JV than its total sales in the US, and this delayed having to declare bankruptcy. The import duty on foreign-made cars also helped GM in China. Even today, it continues to enjoy a higher margin on cars made and sold in China than in the US.

Lest anyone get the impression that China’s economic success depended on transfer of American technology, the total US investment in China has been far less than factories set up there by Hong Kong and Taiwanese businesses. These ethnic-Chinese businesspeople entered mainland China at least a decade before US companies, and they were the ones that introduced good manufacturing practices to China.

A trade war puts the US at a disadvantage

If the Trump team insists on launching a tariff war, it needs to understand that America will be at a disadvantage, simply because China does not have to buy commodities such as soybeans, pork and wine from the US. Other countries are eager to sell to China. You can think of China as a buyer’s market.

In contrast, if the US were to stop buying daily-use consumer goods from China, the American household would have to pay a lot more for imports from elsewhere. You can think of the US as a seller’s market.

There is no question that membership in the WTO has greatly helped China’s rise economically, because if a factory can’t compete, it goes out of business. Consequently China is a much stronger country than it was two or three decades ago.

Reliance on stolen intellectual property might have been important in the past, but China is now generating significant IP of its own. In some areas, such as fifth-generation mobile communications, robotics in manufacturing and artificial intelligence, China is already among the world leaders.

Threatening a trade war and other combative posturing will not deter China’s goal to become the strongest economy in the world. At the same time, China does not interfere with American elections or join in Middle East conflicts.

China goes out of its way not to pose a security threat to the US. A quick comparison should amply illustrate this point: The US Navy holds “freedom of navigation” exercises in the South China Sea. China has declined to reciprocate by conducting such exercises in the Caribbean.

To treat China as an adversary is a misuse of the US federal budget, takes attention away from genuinely urgent issues in other parts of the world and gives up any opportunity to collaborate with China in ways that could spell real benefits for the American people.

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