SPEAKING
FREELY US
should rethink China views By
Ruoweng Liu
Speaking Freely is an
Asia Times Online feature that allows guest
writers to have their say. Please
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contributing.
A French proverb
describes marriage as a fortress besieged - those
outside want to break in, and those inside want to
get out. This is also an apt description of the
current US-China economic relationship. Although
outsiders consider this relationship to be
mutually beneficial and crucial for both
economies, the United States now fumes about
losing a trade war against China, while China
frets about being overly dependent on the US
market.
Given the heightened rhetoric
against China in the recent US
election, the US-China
economic relationship is frankly an awkward topic
for a Chinese citizen living in the US like me. I
know I am supposed to be diplomatic and say
something like "both nations should make a greater
effort to understand each other and join hands to
create a better world... "
But I will be
an obnoxious foreigner this time and say: "Uncle
Sam, please quit whining." After all, many of our
American friends have given China a healthy dose
of criticism (which I sincerely wish that my
countrymen could be allowed to hear even if they
would not accept it).
As a start, I see
many US accusations against China as being
hypocritical. During the past months, President
Barack Obama and some officials in his
administration have criticized the Chinese
government's "unfair" subsidies for the Chinese
auto and solar industries. Yet the president
himself has repeatedly boasted about his
multi-billion dollar bailout of the US auto
industry, and his administration provided US$500
million in a preferential federal loan to the US
solar panel maker Solyndra before it went
bankrupt.
Hypocrisy aside, the more
important question is whether the US has benefited
much from "getting tough on China". President
Obama has often cited the 2009 anti-dumping duty
on Chinese tires as a shining example of his
administration's effort to confront China and save
American jobs. But did that really work out well?
Economists calculated that the duty helped create
at most 1,200 American jobs, but cost American
consumers $1.1 billion in higher prices for tires
and another $1 billion in lost sales for American
farmers as a result of China's retaliatory tariff
on US chicken products. If you do the math, that's
close to $2 million for each American job created.
Speaking of Chinese retaliation, one
common misconception is that China dares not to
retaliate against adverse US trade measures
because the value of its exports to the US is four
times that of US exports to China. If China were
to retaliate against the US on a dollar-for-dollar
basis, the theory goes, China would run out of
ammunition first.
But this supposed US
advantage is more imagined than real because any
tit-for-tat between the two countries would likely
be limited - the world economy would tank if its
two biggest economies raced to the bottom in an
all-out trade war with each other.
As
evidenced by the tire case, China often does
retaliate (China also recently initiated
investigations on US polysilicon in retaliation
for the punitive US duties on Chinese solar
cells). In fact, the US may stand to lose more in
such tit-for-tat exchanges because most of China's
exports have little added value. For example,
Chinese inputs account for less than 2% of the
value of each iPhone imported to the US from
China, while Apple's profits amount to 60% of that
value.
Sadly, the misguided US effort to
"get tough on China" does not stop with trade but
extends to investment. Countries with a
substantial trade surplus like China tend to
invest heavily overseas, and such investments
create jobs in other countries. However, the US
government has been cool towards Chinese
investment. Unlike companies from most other
countries, Chinese companies wishing to invest in
the US are often singled out for a heightened
national security review by the federal
inter-agency Committee on Foreign Investment in
the United States (CFIUS).
Worse, CFIUS
currently can reject Chinese companies' investment
bids without providing any explanation or
supporting evidence, and its decisions are not
subject to judicial review (Sounds familiar, China
watchers?). Still not satisfied, a congressional
panel on November 14 called for even tighter
screening of Chinese investment.
Most
reflective of the US government's attitude toward
Chinese investment is the October 8, 2012, House
report on the Chinese telecommunications companies
Huawei Technologies and ZTE Inc. With virtually no
supporting evidence except for unsubstantiated
allegations and rumors, the report sternly warned
against allowing the two companies to do business
in the US because of concerns about cyberspying
and intellectual theft.
During the
year-long House investigation, two congressmen
reportedly even went to Huawei's American lawyers
and told them to stop representing Huawei (I had
thought this kind of thing could only happen in
China). Even if the US government's security
concerns are understandable, its attitude is not.
Instead of saying "we are not letting you
in this time but may reconsider if you do this and
that," the US government effectively told Huawei
and ZTE: "We just don't like you and don't even
think about a next time." This is hardly the way
to do business or create jobs.
The extent
of US hostility towards China in trade and
investment is puzzling given the co-dependence of
the two economies. The benefit to the US from its
economic relationship with China is real - and
contrary to what many claim, such benefit does not
come at the cost of US jobs.
Even if you
don't buy the argument that many US jobs
supposedly lost to China would not have stayed in
the US anyway, you need to recognize that China is
now the United States' fastest growing export
market and, indeed, already its third largest
(just behind Canada and Mexico). If US exports to
China continue to grow at 18% annually as they did
from 2000 to 2011, China could overtake Canada as
the biggest market for US goods in fewer than 10
years. These US exports will and already have
created many US jobs, especially in the
agricultural, service, and high-end manufacturing
sectors.
Chinese investment has an even
greater potential for creating US jobs. A
cash-flush China would be happy to invest in the
United States if it is allowed to do so, and many
Chinese companies would be happy to comply with
whatever security requirements the US government
has in store (if it tells them what these are).
In fact, many American governors and
mayors already know this (they have gone to China
to solicit investment); the Europeans know this
(the British government recently allowed Huawei
and ZTE to do business in the UK while requiring
them to follow certain transparency requirements);
and the Canadians know this (the Harper
administration is now pushing hard for a
Canada-China investment treaty).
In an old
Chinese legend, a peasant killed his hen to
extract just one egg that the hen had trouble
laying. I know many in the US are as unhappy with
the US-China economic relationship as the peasant
was with his hen. But don't kill that hen - the
eggs it has laid and will lay in the future are
more valuable than the one egg you want so much
now.
Ruoweng Liu is an attorney
specializing in international trade and investment
law. He has a Juris Doctor degree from Stanford
Law School and currently practices at a global law
firm based in Washington, DC. The views expressed
here are entirely his own.
Speaking
Freely is an Asia Times Online feature that allows
guest writers to have their say.Please
click hereif you are interested in
contributing. Articles submitted for this section
allow our readers to express their opinions and do
not necessarily meet the same editorial standards
of Asia Times Online's regular contributors.
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