This is always my favorite week of the year to be in China. It’s the time when the China debate goes from the inside to the outside, as the National People’s Congress segues directly into the China Development Forum.
This was the last question of the meeting -- and the final word from the Chinese leadership at this year’s China Development Forum. The Premier was especially animated and intense in framing his response. “China views this relationship as very important,” he said, “and takes these risks very seriously.” He implied that efforts will be made to further expand Chinese imports from the US as well as deal with the all-important concerns over intellectual property rights. He was emphatic in re-emphasizing the limited role that foreign exchange policy could play in tempering the US saving shortfall and related trade imbalance -- in effect, implying no major change in the RMB exchange rate. At the end of his discourse, he leaned forward, looked me straight in the eye, and stated with great emphasis, “You can take this message back to the American people: It is unfair to make China a scapegoat for structural problems facing the US economy.”
The next morning, as luck would have it, I had the opportunity over breakfast to run Premier Wen’s comment by three US politicians who just happened to be in town -- Senators Schumer, Graham, and Coburn. As they put it, the liberal, the moderate, and the conservative, respectively, had come to China in a rare moment of solidarity to demonstrate both the breadth and depth of bipartisan political support to bring the US-China trade issue to a head once and for all. Schumer and Graham, of course, are co-sponsors of a bill (S. 295) that would impose 27.5% tariffs on all Chinese imports into the US unless there was an RMB currency revaluation of a like amount. They were steeped with confidence that this bill had overwhelming support in the Senate and most likely comparable support in the House. And since it played to the angst of middle-class US wage earners, they did not expect the first veto of a politically-weakened President Bush to be exercised on this issue.
“It worked in Japan and it will work in China.”
The big risk is that China calls Washington’s bluff and the two parties start to stumble down the very slippery slope of trade frictions and protectionism.
“I care deeply about the loss of US manufacturing jobs to China. If I am successful in cutting our trade deficit with the Chinese, not only will those jobs come back home but I will have succeeded in boosting US saving and cutting excess consumption. My bill can do all that and more.”
“Let me get this straight,” I gasped, “tariffs will boost saving?”
In a short span of 24 hours, I had heard it all on both sides of the China debate. The Chinese leadership was amazingly transparent in expressing their own hopes and concerns at a critical juncture on the nation’s extraordinary journey. And then the Washington crowd blitzed into Beijing with an agenda of its own. What was missing was a willingness to bend -- for both sides to come together in the best interests of the collective whole. The great paradox of globalization never seemed more vivid -- our economies may be global but our politics remain decidedly local. Unless we resolve that paradox, I am afraid the win-win dreams of globalization advocates could remain fleeting.
