Tuesday, July 17, 2012

Trade War-Mongering

So I was reading the Economist news magazine -- which I love, by the way -- and it got me thinking about US-China policy...

It's interesting to me how, in many ways, America's ideals sometimes are for sale.  With a few exceptions (notably Google, though they probably had mixed motives), it seems that most businesses and Western governments are content with turning a mostly-blind eye to China's totalitarian & repressive tendencies because the Chinese market has become such a critical element of their goals for revenue growth and economic stability.  From an unbiased perspective, China's strategy is pretty brilliant -- use their growing international economic clout as leverage to cover up its many human rights abuses (against Tibetans, ethnic Uyghurs, & the usual political dissidents) and bullying of neighbors (most notably in the South China Sea).

But while this strategy has shown some success in the past decade, it's not without its share of weak links.  For example, the Obama Administration -- through Secretaries Clinton & Panetta -- has taken the opportunity created by China's overreaching in the South China Sea to build or strengthen alliances with the victims of Chinese aggression in Southeast Asia, as well as India & Burma.  In the post-Cold War era, America's strategy has necessarily shifted from countering a specific world superpower (which no longer exists) to containing current or aspiring regional superpowers (such as Russia, China, & Iran).  Containing these regional powers by strengthening local alliances is a critical element of U.S. foreign policy and is obviously an on-going process.  If Chinese rhetoric & pouting are any indication, America's squeezing has not gone unnoticed.  Yet, at the same time, this regional containment strategy does little to encourage political liberalization.

One intriguing lever in the battle against Chinese totalitarianism is one that U.S. policymakers are probably least likely to relish: economic.  While both parties try to out-bash China in election years -- especially in the Rust Belt where outsourcing has hit the hardest -- we are all eager to benefit from the economic growth prospects presented by a growing Chinese middle class with a taste for American style (think iPhones & Ethan Allen furniture).  But, for largely these same reasons, the economic lever might be the most potent.  In an interesting (and I think revealing) vignette from his memoir, then-President George W. Bush described an interaction with Chinese President Hu Jintao.  In response to Bush's question 'What keeps you up at night?,' Hu "quickly replied that his biggest concern was creating 25 million new jobs a year... [which] showed he was worried about the impact of disaffected unemployed masses."  Chinese citizens, not unlike Western businesses described above, appear mostly content to forgo political freedoms if their economic outlooks continue to improve.  This fact is not lost on Gulf State monarchs, who essentially buy political stability from its citizens through generous oil pensions.  One only has to look to the Arab Spring, though, to see what happens when the masses feel broke and disenfranchised.

With Chinese hyper-growth appearing to wane, the time may be right for America and its allies to flex some muscle against China's unfair trading practices, currency manipulation, and lax attitude toward (& in many cases outright disregard for) intellectual property laws.  When Mitt Romney states that he will "label China a currency manipulator on Day One," he is dismissed as either pandering to Ohio or else accused of stoking a costly trade war by the likes of former Ambassador to China John Huntsman.  And while the first point (& perhaps the second) may be true, there may yet be value in such an aggressive take on China.  From how China is routinely described, it's easy to think that is has 'fully arrived' on the world economic stage, but with slowing growth and millions of poor peasants entering its metropolises every year, China has its own set of unique challenges which it must come to grips with.  To use a hockey analogy, China may have made it to the pros, but it's still a wobbly-kneed rookie -- and a collective hip-check from the likes of America, Europe, & Australia could prompt the kind of soul-searching which may lead the Chinese people to speak out for political freedoms.  Who knows?  The economic tactics we employ against China today may someday be compared with the 1980s defense build-up President Reagan skillfully used against the Soviets.  And while there probably won't be a tearing down of the Great Wall, the effects might be just as revolutionary.

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