Time to look beyond numbers in China-US trade gap

By David Michael (China Daily)
Updated: 2007-09-13 09:17

It is important to keep the big picture in mind. US policymakers should be advocating the benefits of greater trade to both sides, rather than seeking to erect barriers. By doing so they might also gain the leverage needed to convince China to make some tough economic and social choices.

For instance, Chinese regulators might be convinced that it is in their own interest to crack down on copyright and foreign patent violations and improve intellectual property protections, issues that greatly concern US companies.

The US also might be in a better position to encourage China to move forward with meaningful environmental protection. This would include implementing much stronger environmental emissions standards, investing in new refineries capable of processing cleaner fuels, and mandating that domestic Chinese producers comply with globally accepted pollution standards.

China also needs to confront other problems. Despite its emergence as a global economic powerhouse, the country is still home to 18 percent of the world's poor, with 150 million people subsisting on less than US$1 per day.

But China's rapid economic development is lifting tens of millions of people out of poverty, according to the World Bank. That is something Americans should be happy about.

They should also be happy that Chinese people have an overall favorable opinion of the US. A 2006 Pew poll of global attitudes, for example, revealed that Chinese peoples' attitudes toward America are far more favorable than the opinions held by some of its more traditional allies.

In considering the US-China trade relationship, Americans should reflect on the following: The past decade of rising trade with China has helped tens of millions of people in China rise out of poverty, has helped fuel generally favorable attitudes toward Americans, and has helped provide important export and investment markets for US companies, with the potential for substantially more growth in the future. Is there some other plausible scenario more positive than that?

The US and China each bring to the table distinct advantages and disadvantages. China's main advantages are its low-cost labor pool, its impressive infrastructure that enables companies to gain access to this labor, and its pro-investment policies. Neither currency adjustments nor trade barriers will change this situation.

Indeed, Oxford Analytics has recently reported that even a 25 percent appreciation in China's currency would bring about only a marginal change in the trade deficit.

Asking China to turn back the clock on its growing role in the global economy is not the answer. Indeed, what will become really crucial in the years ahead will be the task of working with China on issues of vital common interest.

The decisions that China makes about growth, environmental and energy policies, and global warming will soon be the most important questions for all of us. The US would be well served to ensure that these issues are prominent in its overall China relationship.

The author is a senior vice-president and director with the Boston Consulting Group's Beijing office

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