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US-China trade ties deepen amid challenges

(Xinhua)
Updated: 2009-09-07 10:59

WASHINGTON: The US-China trade relationship is like many 30-year marriages - while the union remains solid, spats become unavoidable.

Former US Secretary of State Henry Kissinger (L) and Chinese State Councilor Dai Bingguo greet each other at a dinner after the first meeting of the US-China Strategic and Economic Dialogue in Washington, July 28, 2009.[Agencies]

Political and economic match-making pundits have prescribed more than small talk to try to get the bilateral trade ties back to honeymooning solidarity.

Some are already looking forward to the scheduled visit to China by US President Barack Obama in November.

Protectionism is the key dispute-causing issue with the US-China trade relationship, with some experts saying it is "deepening" under the Obama administration. Some fear that protectionism could grow in today's flagging global economy.

This explains why both China and the United States have publicly stated a desire to avoid protectionist pitfalls in what is the harshest economic time since the Great Depression.

Chinese Commerce Minister Chen Deming said in Beijing last month that avoiding trade walls would be an "imminent priority."

US Ambassador to China Jon Huntsman echoed Chen's sentiments, saying a spate of meetings following this summer's Strategic and Economic Dialogue plus Obama's tour of Beijing would set the bandwidth for further communication.

"By the end of the year, we should be in better shape than ever before between the United States and China to be able to anticipate a positive tomorrow," Huntsman told reporters in Beijing on Wednesday.

"I hope we will be able to transcend our disagreements and focus on peace and prosperity," he added, referring to Obama's upcoming visit.

The US ambassador said that, despite Obama's willingness to engage the Chinese more than his predecessor, recent rhetoric underlines a growing sentiment of economic nationalism and protectionism.

Some have taken note of Obama's protectionist statement made during last year's presidential campaign and are unsure of his intentions.

Nicholas Hope, director of the Center for International Development at Stanford University and a former country director for China at the World Bank, said such statements are unlikely to translate into actionable policies.

"I would like to think that it's not much more than rhetoric," he said.

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Others, however, have voiced concerns over the US president's support from unions and said he could become beholden to groups who view trade with China as a threat to their own livelihoods in the US.

But Hope predicted that Obama would avoid such entrapments. "I wouldn't want to see the Obama administration go down that path and I'm fairly confident that they won't."

"Protectionism is in no one's interest in the long term," he said, adding that protectionist policies were one of the driving forces behind the 1930s depression.

Jennifer Richmond, China director at Strategic Forecasting, Inc., said recent protectionist rhetoric had more to do with the economic downturn than with the new administration.

The firm, a private global intelligence agency, is more commonly known as Stratfor.

Given this unusually harsh global economy, it is to be expected, Richmond added.

Many US economists say the United States is unlikely to return to its former level of profligacy - Americans have for years racked up considerable household debt and saved little, and this could decrease demand for China's exports, even when the US economy slogs towards a rebound.

Some have warned that China may not see the same strong demand for its exports as before, as Americans tamp down their consumerism and shy away from pre-recession tendencies to live beyond their means.

The intelligence expert suggested that China must create a more vibrant domestic consumer culture and reduce its reliance on exports in order to offset the effects of Americans' new frugality.

While China realized the need to do this, ramping up domestic demand was no easy task for any country and could take more than a decade, she said.

Experts said the Strategic and Economic Dialogue, which took place in Washington, D.C. late July, displayed a newer, deeper US-China engagement, though few significant breakthroughs had been spotted by Western media at the forum, which is deemed by Richmond to be a more comprehensive mechanism for addressing Sino-US relations than those under the Bush administration,

The engagement displayed at the Washington forum symbolized both countries' willingness to beef up cooperation.

Richmond said that, while cross-Pacific trade was essential to both countries' economies, there were more issues to resolve such as a dispute over tire imports from China.

US labor organizations are lobbying for restrictions on tire imports from China, while Chinese manufacturers said tariffs would shut them out of the US market.

The US president is expected to announce his decision on the issue by September 17.

Protectionism aside, the United States and China are facing other, more long-term and structural challenges.

Philip Levy, resident scholar at the Washington, D.C.-based American Enterprise Institute and a former member of the state secretary's policy planning staff, said it was too early for the Obama administration to determine what shape US-China trade relations would take.

But so far there are few differences - in substance, at least - from the Bush administration, he added.

"In terms of substance, there is not a lot of difference between Obama's relationship with China and Bush's," he said.

One difference, however, is that Obama may strive to enforce World Trade Organization rules more than his predecessor did, the scholar said.

"How that will play out remains to be seen," Levy said.

Still there is much speculation that Obama is caught between two forces - free trade on one hand and pressure from home unions on the other, Levy added.

But ambassador Huntsman expressed optimism over the bilateral trade relationship, saying his top priority in Beijing would be "helping lay the foundation for sustainable growth in the region and the global economy."