GOP (Grand Old Party or Republican) presidential candidate Mitt Romney last
week rolled out his plans for jump-starting the American economy. This part of
his campaign - actually the most important and impactful to the average
American - got the least attention.
Romney's economic plan, central to his ability to campaign as the only
candidate with the sort of inside-track business experience his supporters
believe the country needs, was largely relegated to second place.
The primary campaigns of both parties have degenerated into contests over
trivial matters when much more important issues
need debate. Against the back-drop of the last two GOP presidential debates,
where issues such as who could most creatively attack social security, or
whether evolution should be taught in public schools received the most focus,
it was understandable that many overlooked Romney's economic plan. In
particular, it was easy to look past his very aggressive language about China
and how his administration would respond to China's trade policy.
The majority of Romney's proposals are boilerplate conservative thinking: lower
corporate income taxes, get government out of the business of bankrolling new
technologies, and "cut, cap, and balance" the government's spending. What is
unique, especially from a candidate whose interests are expected to widely
align with those of American multinationals, is the language he chooses to use
about China.
He believes the time has come for "confronting China" about their trade
policies; he vows that under his leadership, the US Treasury would label China
a "currency manipulator", something the Timothy Geithner-led Treasury has been
reluctant to do; and if none of these result in the sort of adjustments he
wants to see, Romney pledges he would proceed with countervailing duties
against Chinese-made imports.
The most commonly held belief about this part of Romney's plan is that it was,
as the Wall Street Journal was quick to point out, "a political maneuver to
blunt the criticism he'll receive because some of Bain Capital's companies sent
jobs overseas."
Perhaps; but the larger point is that a pro-business, historically very
pro-free trade GOP candidate has found it politically expedient to call out
China as part of America's current economic problems. At its worst, this
distracts Americans from the sort of internal changes that need to be met which
have nothing to do with China; but it also suggests that a portion of the
Republican party which was most in China's corner is beginning to rethink their
position on how to engage the Asian country.
Before the 2008 financial crisis, attitudes in Washington towards China used to
be fairly predictable.
A handful of Republicans feared that China might harbor aspirations to expand
their nation through force; many of these also did not like doing business with
what they still saw to be "communist" China. Both misgivings were heavily
colored by the Cold War. But the majority of Republicans were able to put this
sort of thinking behind them and believed that trade with China was good for
business. Simply put, they were on the side of large American corporations as
they pushed for deeper access to China's markets.
Opposite this group were, by and large, Democrats whose constituents tended to
be from organized labor and America's blue-collar workforce. They saw China's
trade policies as unfair, making it impossible for American workers to compete
against China. Long frustrated with China's trade policies, their frustrations
were perfectly reflected in Romney's economic plan.
What are we to make of the realization that one of the GOP's leading candidates
for president now holds to a policy that most Democrats also believe the
country should be pursuing? Is this nothing more than careful political
triangulation on Romney's part to try and deal pre-emptively with a liability
dating back to his days at Bain?
Or is this an important crack in the great wall of trade between the US and
China? After all, even President Barack Obama was not above taking a stab at
China during a 2007 Democratic primary speech, when he said that China was
"neither our enemy nor our friend. They're competitors."
The alliance that China should be most worried about is the one they have long
been able to ignore: between business and organized labor. The latter's
grievances with China are well-known, but have become more popularly accepted
as the 2008 recession has dragged on and even jobs in the non-unionized labor
segment of the American economy have failed to recover. What is new are the
frustrations felt by the constituents Romney represents: business.
Here the frustrations with China rest predominantly on the inability of many
Western companies to sell into China's market. Specifically, the burdens placed
on companies who must first get their products listed in China's procurement
catalogs before they can sell into the country's lucrative state sector. While
during the most recent Strategic Economic Dialogues (SED) between the two
powers, country of origin requirements have largely been agreed to be
eliminated, this direction has not always been pushed down to critical Chinese
agencies like the State Food and Drug Administration (SFDA).
As a result, what Beijing agrees to on a strategic level is never passed along
to the country's regulatory agencies. Whether this is intentional or the
by-product of poor inter-departmental communication is immaterial. After the
summer of 2010 SED, when country of origin requirements for medical devices
were a specific and publicly agreed upon outcome, American companies were
shocked to hear that the late 2010 updated SFDA requirements included a country
of origin stipulation.
In addition, many American and European companies have cried foul at the
attempt by China to force transfer of technology to a Chinese partner if they
are to sell into particular segments of the Chinese market. Ostensibly part of
China's drive to move up the value chain and get away from its role as the
world's factory, the policy was designed to spur innovation and accelerate
technology transfer; however, for the Western companies who were forced to
choose between sharing their technology with a Chinese company that would
likely become a competitor down the road or turning their back on the upside
opportunities in the China market, it was a terrible position to be put in.
Taken together, segments of American business that were historically very
pro-trade with China are beginning to re-think their position. Their motives
are certainly different than those of organized labor, but the policies they
want to see from the next American president are more similar than they have
ever been. This is one of the rare moments in Washington where things actually
get done: when political factions who, for admittedly very different reasons,
both agree on a course of action. Such an alignment should deeply worry China's
leaders, which is perhaps exactly what Romney wants.
Just as the language American politicians use changes as they move from the
primary campaign to the general election, so does the language of the US
Congress tend to be more acerbic than that from the executive branch. If
congress had its way, our policy towards China would likely have shifted
several years ago. Instead, the cool heads and calm hands in the executive
branch have made sure that we have kept most things as they are relative to
US-China relations.
But Romney's economic plan suggests that the most viable candidate in the GOP
presidential primary may want to change certain important elements of America's
trade relationship with China. Coming from someone with such lauded credentials
from America's big business community, Romney's change in attitude is something
the Chinese need to pay attention to.
Benjamin A Shobert is the managing director of Teleos Inc
(www.teleos-inc.com), a consulting firm dedicated to helping Asian businesses
bring innovative technologies into the North American market.
(Copyright 2011 Asia Times Online (Holdings) Ltd. All rights reserved. Please
contact us about sales, syndication and republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
