Every election cycle, somebody likes to bash China. (Remember Bill Clinton accusing George Bush of coddling “butchers in Beijing”?) China is an easy target, and bashing it is fun because it’s so much simpler to blame foreigners for our troubles than to focus on our own issues. But more broadly, I think, making a case for relations with China is tough for politicians who feel the need to dumb-down their rhetoric and identify an enemy.
Let’s take Hillary Clinton as an example. After mowing down NAFTA, Clinton has now turned her anti-aircraft heavy machine gun toward China. Here are a few snippets from her campaign:
"We do have to get tough on China," she said on Sunday while campaigning in North Carolina, which has seen a loss of more than 200,000 factory jobs since 2001. "It is long past time for us to blow the whistle."
"This country manipulates its currency to our disadvantage, they engage in broad-based intellectual property theft, industrial espionage, they do not follow the rules they agreed to follow when they joined the WTO. What do we get in return from them? Well, we get tainted pet food, we get lead-laced toys, we get polluted pharmaceuticals."
HARSH! (And very interesting considering Bill Clinton was the godfather of the trade-will-set-the-Chinese-free school of U.S. diplomacy – another canard, but that’s another blogpost.)
Yes, I know there’s a massive trade imbalance here, about US$260 billion at last count. But let’s take a closer look at some of Clinton’s claims. On the tainted imports, sure, Chinese companies – and arguably the Chinese government -- have been sleazy, but the real problem is right here at home. It’s easy to blame China, but the real story is that the U.S. regulatory structures have failed to cope with the globalization of trade. Yes, there are bad actors all OVER the globe (China included, although actually more product recalls involve Mexico than China). But the real solution is not to shut down trade with China, it’s to make a better FDA and Consumer Product Safety Commission. But that’s harder to do, so Clinton bashes China.
As for currency manipulation, wrong again, Senator. China has quietly allowed its currency, the Yuan, to gain substantially against the dollar over the last year. In April, $1 bought less than 7 yuan for the first time since 1994. Over the last three years, the Yuan has appreciated more than 18 percent vis-à-vis the dollar. Yes, China is allowing the yuan to gain against the dollar for domestic reasons – because it might help lower China’s high inflation. But the point is that they’re doing it. In April, Treasury Secretary Hank Paulson recently praised China for doing so, although he added that China should let the yuan appreciate more.
On the issue of stealing U.S. jobs, again, China is an easy target but Clinton seems to be firing blind. First, manufacturers have been bleeding jobs in the United States to developing countries for decades. So any developing country is an easy target: Mexico, Thailand, Malaysia, Bangladesh, you name it. China just happens to be big – and Asian. (it all has the whiff of Japan-bashing in the 1980s). But trade goes two ways, and Clinton’s call to “get tough” with China ignores the fact that Americans profit from trade with the PRC.
First, low-cost imports keep prices down – and that especially helps consumers living through a recession. And, second, all those imports means China has a lot of extra cash to buy foreign goods. And buying they are. The U.S.-China Business Council (you can tell by the name that they’re pro-trade) released a report on May 1 that shows that:
1) Almost all congressional districts (406 out of 435) registered triple-digit growth in exports to China between 2000 and 2007.
2) Nationwide, from 2000 to 2007, exports to China grew 301 percent to $65.2 billion. Worldwide U.S. exports grew only 44 percent.
3) Contrary to common perceptions, congressional districts in states such as Pennsylvania, Ohio, Indiana, North Carolina, and Michigan also benefit from rapidly growing exports to China—and these exports include manufactured goods and machinery, computers and electronics, transportation equipment, and other high-end products.
In North Carolina, where Clinton railed against Beijing, China is the state’s third most important export market. Last year, North Carolina exported almost $1.8 billion worth of goods to China, up 405 percent since 2000. As for Indiana, where Clinton has continued her China-bashing, exports have jumped 355 percent since 2000 to $758 million.
Politicians seeking to look at China with a more textured view also get little love from pundits who, as one former U.S. official involved in U.S.-China ties said, “are more comfortable talking about American values than American interests.” A close relationship with China may not jibe with American “values” – human rights, the First Amendment, religious freedom – but it’s crucial to American interests. Somehow we’ve got to get used to that.
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