American tale: Prosperity goes east

Short-term trade deals with China might leave the U.S. at a long-term disadvantage.

by Julian Switala

As a sign of goodwill between the U.S. and China, visitors to the National Zoo in Washington, D.C. will continue to enjoy the presence of two Chinese giant pandas, Mei Xiang and Tian Tian, for five more years.

However, the most important appearance in Washington last week wasnâÄôt a cute panda duo but ChinaâÄôs president, Hu Jintao.

U.S. President Barack Obama, Hu and top government officials discussed the necessity of liberalizing trade, improving access to markets and the future prospects of their relationship.

Given the 10 percent GDP growth rate in 2010 and the potential for China to overtake the U.S., Kenneth Lieberthal of the Brookings Institution said that “[M]anaging the rise of China well is the single most consequential development for the U.S. over the coming 10 years.”

U.S. officials have consistently accused China of manipulating the valuation of currency, not protecting intellectual-property rights and for massively subsidizing its domestic markets.

Regardless, easing trade restrictions is supposed to benefit everyone, right? Less tariffs make products cheaper and trade deals mean businesses can provide goods and services at a lower cost.

Obama made this very assertion by claiming that, “If weâÄôre serious about fighting for American jobs and American businesses, one of the most important things we can do is open up more markets to American goods around the world.” He went on to say that the $45 billion in trade deals negotiated with China “will support some 235,000 American jobs.”

Regardless, it will be years before the stubbornly high unemployment rate in the U.S. returns to normal.

An important consideration when evaluating the economic wellbeing of the U.S. is the composition of the Chinese government. One aspect worth noting is that the Chinese government has an enormous say over what its companies do. In effect, the economy is still, for the most part, state-controlled. This means that companies can collude on policies on which they would never agree separately but which improve the strategic goals of China as a whole.

One factor contributing to this is that eight of the nine top party leaders have engineering backgrounds, causing officials to partake in scientific decision making and be practically minded in regards to national interests. Unlike politicians in the U.S. who mostly come from legal and non-science, technology, engineering and mathematics backgrounds, Chinese officials have a reputation for recognizing a problem, devising a solution and allocating funds to it as quickly as possible.

Case in point: Proposals for bullet trains in China met almost no debate and were built relatively quickly across China. In the U.S., on the other hand, polarizing partisan debate continues to paralyze decision-making in regards to transportation issues.

Additionally, China has already utilized such a method to achieve trade deals which only benefit the U.S. in the short term but which give China the advantage in the long run.

For instance, despite the recent trade agreements and the millions of profits that will be gained by specific companies such as General Electric, Boeing, Caterpillar and Duke Energy, it is all but guaranteed that these deals will not benefit American workers or America as a whole.

These ill-intentioned plans only breed mistrust and may stifle economic negotiations in the future. Rather than playing a mercantilist game, the Chinese should partake in panda diplomacy.


Julian Switala welcomes comments at [email protected].