The Spitfire's Grill
Regular Rants from a Pragmatic Liberal
Tuesday, May 31, 2005
Topic of the Day: China
Ah, back to China. Today's belated Topic of the Day was inspired by Sunday's Kristof op-ed entitled "The China Scapegoat".


The most important diplomatic relationship in the world is between the U.S. and China. It's souring and could get much worse.
I concur. However, I'd like to add that the relationship between Japan and China comes in a close second. The three most economically powerful countries in the world and China seems to be souring with both.
Alas, the U.S. is mostly to blame for this. And the biggest culprit of all is the demagoguery of some Democrats in Congress.

There are plenty of legitimate reasons to be angry with China's leaders, but its trade success and exchange rate policy are not among them. The country that is distorting global capital flows and destabilizing the world economy is not China but the U.S. American fiscal recklessness is a genuine international problem, while blaming Chinese for making shoes efficiently amounts to a protectionist assault on the global trade system.

Kristof is mostly correct. The push for import taxes against China is mainly a Democrat-led coalition, I'm sorry to say. But last time I checked there were some Republicans like Lindsay Graham on board as well. As for the "fiscal recklessness", that falls solely in the hands of a Bush Administration that tries to spend its way out of every problem.

The Chinese pegging their currency to ours is, for now, a good thing. It is good for China because it allows them to keep pace with the US market that creates the demand necessary to grow the Chinese economy. It has been good for us since Bush's fiscal recklessness has necessitated that the Chinese prop up the Dollar by buying up American T-Bills and other such investments.
In fact, China's pegged exchange rate has brought stability to Asia, and the Chinese boom has tugged Japan out of recession and increased prosperity worldwide. In recent years, China has supplied almost one-third of the growth in the global economy (measured by purchasing power), compared with the 13 percent that came from the U.S.

Moreover, the U.S. has a history of offering Asia economic advice that proves awful. U.S. pressure helped produce Japan's disastrous bubble economy and aggravated the 1997-98 Asian financial crisis. So when American officials urge an adjustment in the yuan exchange rate, the Chinese should keep a hand on their wallets.

This is certainly true. The US's economic advice is about as reliable as its ability to choose dictators to run small Latin American countries.
Over the last five years, President Bush has done an excellent job in managing relations with China - it's one of his very few successes in foreign policy - but lately he has engaged in protectionism. This month he reimposed quotas on certain Chinese textiles, and the Treasury warned China that it had better adjust its exchange rate or else.

Mr. Bush abandoned his principles because he was under attack from Democrats waving the bloody shirt of lost jobs. Sure, China's cheap yuan has cost us manufacturing jobs - but it has also led to a flood of Chinese capital to America, keeping interest rates low. If we blame China for lost American jobs in making shirts, we should credit it for new American jobs in banking and construction.
Well, Kristof, you forgot to mention that China did the exact same thing. They imposed export tariffs on their clothing industry (WaPo: "China to Raise Tariffs On Clothing Exports"). It is certainly more preferable for us to impose an import tax rather than China imposing an export tax. There's the smaller issue of who gets the money, but the larger (and far more important) issue of our control over the tariff. We can easily remove it ourselves, but if the Chinese put the tax on then it takes years of diplomatic negotiations with a country that is infamous for using diplomacy as a decade-long stall tactic. And again, not just Democrats. Social conservatives are big on the whole jobs issue (which is why they despise Bush's immigration policies), and social conservatives have far more push with the Bush Administration than the likes of Chuck Schumer.
Americans are also unfair in accusing China of not stopping North Korea's nuclear program. The reality is that the North Koreans don't listen to the Chinese about anything, and many on each side look down on the other. Privately, some Chinese dismiss the North Koreans as "Gaoli bangzi" or Korean hillbillies. And fortified by a bit of liquor, North Koreans denounce Chinese as unscrupulous, money-grubbing traitors. Whenever I meet North Koreans, I tell them that the Chinese government doesn't like me - and my status soars.

China has been pushing hard in the last two years for a negotiated solution to the North Korean crisis, and it at least has a coherent policy on North Korea. That's more than you can say for the Bush administration.

China provides North Korea with much of its power supply (I've heard some ridiculously high figures), so its safe to say that the North Koreans would have to listen to China if the Chinese Government decided to act. The most likely target of a PRNK warhead is Japan, and the nuclear fallout would devastate the coastal cities in Manchuria or the blossoming Chinese ally South Korea.

One of the biggest risks for U.S.-China relations is the - very outside - chance that President Bush will order a military strike on the North Korean nuclear complex at Yongbyon. Most experts say that the resulting radiation leakage would probably not harm nearby countries, and in any case South Korea and Japan would be more at risk than China. But any hint that radiation had reached the Chinese coast would provoke anti-American fury across China.

The Iraq Principle teaches us that this won't happen. Bush doesn't attack countries that he believes will fight back.

There's a third big danger for U.S.-China relations, and this one is Beijing's fault: China's schools teach hatred of Japan, resulting in last month's street demonstrations in which Chinese protesters screamed slogans such as "Japanese must die."

The next act in the drama will unfold at sea. Japanese ships may start exploring disputed waters for oil and gas in the late summer or fall, perhaps with military escorts. China's leaders will then be under tremendous popular pressure to send China's own military vessels to block what Chinese will see as an armed Japanese incursion. And then Japan will ask the U.S. for help under the U.S.-Japan security treaty. ...

Something that I've been talking about since I started this blog...I'll surely come back to it within the next week or two, as Japanese/Korean/Chinese relations is pretty much my favorite topic to yap on about.

In the past, President Jiang Zemin protected the U.S.-Chinese relationship. But many Chinese scorned him as "qin Mei," or soft on the U.S. The new president, Hu Jintao, seems much less likely to go out on a limb to preserve good relations with the U.S.

So it's time for Americans to take a deep breath. Poisonous trade disputes with China will only aggravate the risks ahead, strengthen the hard- liners in Beijing and leave ordinary Chinese feeling that Americans are turning into China-bashers. Sadly, they'll have a point.

Kristof manages to finish the op-ed without ever mentioning the Chinese export taxes (Maybe they nixed the idea? I haven't heard anything.). Maybe Kristof is just trying to make a point. Kristof and the NYTimes doesn't have much influence over China, but it does have some on the US. So for the most part his suggestions are true, though lopsided.

We need a policy of mutual advantage with the Chinese, and right now we just seem to be playing child games with each other like two fourth graders punching each other in the arm during science class.

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