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The truth of the relationship

The US and China would rather work with each other than confront each other, even if they are perceived as rivals. Ali Velshi writes.

india Updated: Oct 31, 2012 02:20 IST
Ali Velshi

Fashions come and go, but blaming China for America’s economic ills during an election campaign is holding strong. What’s likely to sustain, as well, is the relative calm that prevails with respect to US-China relations after the election.

In the third and final US presidential debate, President Barack Obama and his Republican challenger Mitt Romney focused on foreign policy issues. China, as a topic, was pre-determined by the moderator but, even if it hadn’t been, it would have come up as part of Romney’s strategy to say, as often as he can, that he will declare China a currency manipulator on his first day in office. Romney does this to make Obama look too cosy with China and attempts to cast himself as being better prepared to stand up to the world’s second largest single economy.

As China’s status grows as a world power of consequence, and US dependence on trade with it multiplies, candidates seek to tap into Americans’ uneasiness over the two countries’ ties. But China, as Romney may learn, and Obama already realises, is too important to America for either man to follow through on the tough talk.

History bears this out. In 1992, Bill Clinton blasted Chinese leaders as “butchers of Beijing” because of their violent response to pro-democracy demonstrators gathered at Tiananmen Square three years earlier. But, as president, he pushed to grant China ‘most-favoured nation’ trade status for the first time, affording them lower tariffs on exports and more liberal trade rules than they would otherwise have received. Four years later, George W Bush criticised Clinton for being too easy on China. He then proceeded to deepen trade relations during his two terms as president.

Romney is, presumably, tearing a page out of Bush’s playbook, attacking Obama’s record in dealing with China. Romney charges the White House with failure to retaliate for Beijing’s alleged manipulation of its currency, which he claims wins it an export advantage and steals American manufacturing jobs at the same time. Romney attacked China directly on lack of protections on intellectual property, a complaint echoed by major American corporations, which are required to set-up operations in China, only to have trade secrets stolen, they claim.

Obama, in turn, has toughened his administration’s stand on trade disputes with China. Recently, it filed trade complaints against China over auto parts with the World Trade Organisation. The president also cited national security concerns as the reason for ordering a Chinese company to divest its shares in wind farm projects near a Navy testing facility in Oregon. And, Obama claims, the renminbi has appreciated about 10% against the dollar since he took office.

Meanwhile, the growing US national debt has focused Americans’ concerns about China even more. China leads a list of countries that together hold up to a half of the US government’s outstanding debt. Interest costs to Washington could consume almost 10% of the economy by 2035, unless Congress enacts policy changes.

But the reality of the relationship is more nuanced than American voters are hearing from their candidates. As the two largest economies in the world, America and China together are vital to the global economy. Economic malaise in the US (along with trouble in Europe) hurts China, which for the first time in years is seeing growth below 10%. In turn, China’s slower economy will hurt US corporations right when they are expanding their operations there.

What’s more, US businesses are concerned that Chinese leaders may overreact to Obama’s recent moves and retaliate with a trade war that raises tariffs on US good and services in China. Remember, General Motors actually sells more cars in China than anywhere else in the world, including the US.

Both countries are trying to adjust their dependency on each other. China wants to achieve economic growth through the strengthening of its own consumers, and depend less on exports. The US wants greater access to that growing consumer base for its companies.

Both the US and China would rather work with each other than confront each other to get to where they want to go. The relationship between both countries can be summed up in a recent statement that US Secretary of State Hillary Clinton issued on China’s National Day: “China is good for America and a thriving America is good for China.” Nevertheless, the perception of rivalry between Beijing and Washington won’t go away soon, and certainly not on the campaign trail.

Ali Velshi is a CNN anchor and chief business correspondent

The views expressed by the author are personal