SPEAKING
FREELY How to escape China's
noose By Peter Morici
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click hereif you are interested in
contributing.
US efforts to
persuade China to be a responsible player in the
international community have failed. The May
installment of bilateral talks, which under
various names have spanned the Bill
Clinton and George W Bush
presidencies, failed to persuade China to alter
its mercantilist economic policies and act
responsibly on environmental problems.
Thanks to a purposefully undervalued yuan
and huge export subsidies, China enjoys a trade
surplus equal to 8% of its gross domestic product
(GDP), mostly with the United States. This permits
China's economy to grow at more than 10% a year,
but it accomplishes this miracle by crowding out
exports and stealing growth from many smaller and
poorer developing countries.
By compelling
other Asian economies to follow similar strategies
lest they lose their remaining opportunities in US
markets to China, Beijing's selfish policies are
costing the United States $250 billion annually in
lost productivity and 2 million high-paying
manufacturing jobs. Most of those are in
technology-intensive industries, where cheap Asian
labor offers little competitive advantage.
On the environment, China is equally
uncooperative. Soon, China will be the largest
global source of greenhouse gases, those that
accumulate in the atmosphere and trap the sun's
heat, which many scientists say causes global
warming. The annual growth of its emissions of
pollutants overwhelms what Western economies could
reasonably accomplish by adopting stricter
controls.
No solution to global warming is
possible without strict emissions standards in
China, but it refuses to entertain the idea.
Despite its economic prowess, China argues that it
is too poor to participate in a responsible regime
to address global warming.
Chinese
manufacturers make shoddy toys that endanger
innocent children, export tainted drugs, and sell
poisonous foods and personal-care products in the
United States and elsewhere. Surely, with its huge
trade surplus, Beijing could import Western
methods of quality control. Instead, China
arrogantly denies responsibility and blames
bargain-hunting retailers for those abuses. This
illustrates Chinese indifference and the central
problem with US policy toward the Middle Kingdom.
European and US foreign-policy experts
have suggested engaging China in multilateral
talks, perhaps in the Group of Eight club of large
industrialized countries, to resolve currency and
trade issues. The Bush administration has proposed
a similar big power dialogue to strike a deal on
greenhouse-gas emissions. Such proposals have
little chance of succeeding, because China's
leadership simply does not share the same outlook
and values as the large Western democracies.
Western economic powers participate in
international commercial and environmental
agreements because they wish to manage jointly a
mutually beneficial international economy and
protect the global commons, whose integrity is
essential to human survival. The Europeans and
North Americans believe, while differing on the
details, that reasonably open markets and joint
sacrifice will facilitate a more prosperous and
secure world for all.
The Chinese
Communist Party sees Western-style commercial and
environmental cooperation as imposing inconvenient
constraints on its economic-development strategy
and threatening its grasp on power. Since the
Chinese government lacks the legitimacy free
elections anoint, it must deliver hyper-growth to
keep the Chinese people content, even if that
means stealing prosperity from others and
destroying the global environment. Hence China
eschews the international obligations its economic
success should require, and it exploits loopholes
in the rules and the absence of Western consensus
about how to address its renegade behavior.
Offering China major-power status by
engaging it in multilateral dialogue will
accomplish little, because the Communist Party is
much more concerned about maintaining its grasp on
power than becoming a respected stakeholder in the
global community. Western democracies must
recognize this unpleasant reality and deal with
China differently than they do one another.
For example, China's undervalued yuan
provides a 24% subsidy on exports, as measured by
Beijing's purchases of US dollars and other
currencies in foreign-exchange markets to maintain
an undervalued yuan. The European Union, United
States and others should simply levy a tariff
equal to that amount on imports from China. If
China reduces currency purchases, reduce the
tariff. If China increases those purchases, raise
the tariff accordingly. Level the playing field
for Western-based businesses, and let the market
sort out the winners and losers.
To combat
global warming, the United States, EU and others
should adopt tough controls on auto emissions,
power generation and other industrial activities.
Then Chinese products made in ways that do not
meet those standards should be excluded from
markets in industrialized countries.
These
actions would slow the Chinese economic miracle,
but special treatment and endless talks will not
move China to act responsibly.
A bit less
prosperity would erode the Chinese Communist
Party's grip on power and perhaps instigate
democratic change. That would be better for
everyone.
Peter Morici is a
professor at the University of Maryland School of
Business and former chief economist at the US
International Trade Commission.
(Copyright 2007 Peter Morici.)
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click hereif you are interested in
contributing.
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