Yeahman
05-19-2007, 01:07 PM
Cover story of this week's Economist:
America's fear of China (http://www.economist.com/opinion/displaystory.cfm?story_id=E1_JTRJSGD)
One worrying parallel is the Japanophobia of the 1980s and early 1990s. Back then, Japan's rising bilateral trade surplus and its mounting foreign-exchange reserves were seen as “proof” of its manipulated currency and mercantilist attitude. America's paranoia deepened as its jobless rate climbed—especially when the Japanese started buying landmarks like the Rockefeller Centre. In fact, Japan's bubble economy ended up bursting; but not before an outbreak of foolish protectionism. The economic tension even undermined support in both countries for America's security alliance with Japan.
The case against China is even weaker than the one against Japan was. Its economy is far more open. Though much poorer than Japan was then, China is already America's fastest-growing export market. And in contrast to the 1980s, the WTO now exists as an umpire for trade disputes. But logic, alas, may count for less than political grievance. America's low unemployment rate looks set to rise in the wake of the housing bust. To American voters, the Chinese are likely to become more prominent rivals, whether it be displacing America at the top of some economic league tables, winning Olympic medals or buying big American firms (the Chinese are rightly keen to diversify from treasury bonds). Most worrying, though, are the strategic risks. Japan was an ally in Asia: China is potentially a military competitor. Trade tensions could make it easier to see China as a rival and harder to enlist it as a partner.
...
Rather than picking fights over the currency, Congress should step back and ask why Americans are so upset with China in the first place. The answer is that China is a scapegoat for broader economic anxieties to do with stagnant wages, rising income-inequality and dwindling health and pension benefits. These insecurities, which also lie behind the bad idea of introducing labour standards in trade agreements (see article), are much better tackled head on—at home.
...
But the greatest prizes of Sino-American diplomacy are nothing to do with trade. Avoiding war and conflict, naturally, comes top of the list, whether by co-operation over North Korean and Iranian nukes or by building the trust that minimises the odds of a clash in the Taiwan Strait. Then there is China's expansion into Africa, particularly its cosy relations with genocidal Sudan. Global warming, too, ought to be centre-stage. China is building a new coal-fired power plant every week and is set to surpass America as the biggest source of greenhouse gases within a year. If the world is to contain its carbon emissions, America must not only clean up its own act but also help China to green its economic growth.
Mr Paulson wants the strategic dialogue to address some of these broader issues. Congress should stop distracting him.
America's fear of China (http://www.economist.com/opinion/displaystory.cfm?story_id=E1_JTRJSGD)
One worrying parallel is the Japanophobia of the 1980s and early 1990s. Back then, Japan's rising bilateral trade surplus and its mounting foreign-exchange reserves were seen as “proof” of its manipulated currency and mercantilist attitude. America's paranoia deepened as its jobless rate climbed—especially when the Japanese started buying landmarks like the Rockefeller Centre. In fact, Japan's bubble economy ended up bursting; but not before an outbreak of foolish protectionism. The economic tension even undermined support in both countries for America's security alliance with Japan.
The case against China is even weaker than the one against Japan was. Its economy is far more open. Though much poorer than Japan was then, China is already America's fastest-growing export market. And in contrast to the 1980s, the WTO now exists as an umpire for trade disputes. But logic, alas, may count for less than political grievance. America's low unemployment rate looks set to rise in the wake of the housing bust. To American voters, the Chinese are likely to become more prominent rivals, whether it be displacing America at the top of some economic league tables, winning Olympic medals or buying big American firms (the Chinese are rightly keen to diversify from treasury bonds). Most worrying, though, are the strategic risks. Japan was an ally in Asia: China is potentially a military competitor. Trade tensions could make it easier to see China as a rival and harder to enlist it as a partner.
...
Rather than picking fights over the currency, Congress should step back and ask why Americans are so upset with China in the first place. The answer is that China is a scapegoat for broader economic anxieties to do with stagnant wages, rising income-inequality and dwindling health and pension benefits. These insecurities, which also lie behind the bad idea of introducing labour standards in trade agreements (see article), are much better tackled head on—at home.
...
But the greatest prizes of Sino-American diplomacy are nothing to do with trade. Avoiding war and conflict, naturally, comes top of the list, whether by co-operation over North Korean and Iranian nukes or by building the trust that minimises the odds of a clash in the Taiwan Strait. Then there is China's expansion into Africa, particularly its cosy relations with genocidal Sudan. Global warming, too, ought to be centre-stage. China is building a new coal-fired power plant every week and is set to surpass America as the biggest source of greenhouse gases within a year. If the world is to contain its carbon emissions, America must not only clean up its own act but also help China to green its economic growth.
Mr Paulson wants the strategic dialogue to address some of these broader issues. Congress should stop distracting him.