The following is an excellent Reuters report of the existing business
and economic relationships between America and China with all sorts
of implications about the likely future pattern of jobs in America
(and also several of the more advanced countries of Europe). The one
area that isn't covered in the article -- but ought to have been --
is that America (and Germany and England (with Israel catching up
fast) are miles ahead of China in basic scientific research and
probably will remain so for at least a generation as long as China
retains its traditional, rote-learning, authoritarian style of
teaching in its schools, thus cramping creativity from childrens'
earliest years. But, like the Japanese, they're good copyists (and
even improvers). Thus China (plus Japan and South Korea) is likely to
gain an almost complete monopoly of the production of mass-produced
consumer goods in the immediate years ahead (it's almost there
already!) and even in some fairly mass-produced producer goods (e.g.
railways, airplanes).
If, however (as I would strongly maintain) people in the advanced
countries in the last 30 years or so are now pretty chock-a-block
already with the type and range of consumer goods that they are ever
likely to have the time, energy and space to use/enjoy this leaves
growth areas of jobs that will be mainly derived from the biological
sciences. These include health care, education, renewable energy,
food production and the use of DNA-type algorithms in production systems.
Keith
Insight: Ten years on, American business rethinks China dreams
(Reuters) - Few in the United States would recognize Charlene
Barshefsky or remember what she did. Not so in
<http://www.reuters.com/article/2011/12/09//places/china>China where
the former Trade Representative says she is stopped in the streets by
ordinary people and thanked.
Her gift to the Chinese people was leading the U.S. delegation that
negotiated China's entry to the World Trade Organization in December
2001. The removal of trade barriers heralded unprecedented economic
growth for China, vaulting it in a decade to the second largest
economy in the world and helping slash its rural poverty rate from
10.2 percent in 2000 to 2.8 percent in 2010.
"The Chinese consider WTO entry the most historic achievement in
U.S.-China relations since (U.S. President Richard) Nixon's visit to
China," in 1972, Barshefsky said.
It is a different story in the United States where, 10 years on,
China's entry into the club of world trading nations is having
equally huge ramifications.
The flood of cheap manufactured goods gives an extra $600 a year for
the average American family to spend on clothing, shoes, household
goods and electronics. But Made in China has hastened the decline of
U.S. manufacturing. Factory jobs have shrunk in number by 25 percent
the past decade to 11.5 million today, and average factory wages
adjusted for inflation have virtually stagnated.
Chinese imports meanwhile have ballooned the U.S.-Sino trade deficit
to $273 billion, four times that with any other country. It has
stirred anti-China sentiment, a labor union backlash and legislation
in Congress to try and force China to let its currency strengthen
more rapidly to lower its export advantage.
Now American business, lured a decade ago by the promise of a
fast-growing Chinese middle class, is starting to shift gears and
rethink what the China dream can deliver. Some chief executives are
questioning whether the United States is pressing China hard enough
to hold up its side of the bargain in joining the elite trade club.
"I think by any definition -- if you look at the raw numbers -- we've
made a lot of progress. But by the same definition, we'd be fooling
ourselves if there isn't a lot of frustration," said the man who now
holds Barshefky's old job, U.S. Trade Representative Ron Kirk.
The reconsideration of China is taking place while the United States
struggles with an economic slump that has brought high unemployment
and doubts about the country's long-term fiscal health. It is also
taking place in an election year, and while China is a regular target
in presidential campaigns, even Mitt Romney, with the strongest
corporate credentials of all the Republican candidates, has made a
point of criticizing China.
Almost 10 years to the day that China joined the WTO on December 11,
2001, Washington is growing concerned that China has lost its
commitment to freer trade and that as new leaders prepare to take
over next year, China is abandoning its march toward market
capitalism in favor of state mercantilism.
"There's competition between the American economic model and the more
state-centered economic model of China and other countries," said
Robert Hormats, U.S. Undersecretary of State for economic affairs in
an interview last month.
For the United States, toughening its economic stance toward the
world's emerging superpower is a delicate balancing act and carries
with it geopolitical risks as China flexes its muscle across Northern
Asia, Africa and Latin America.
"We have a challenge in dealing with China," said Hormats, one of the
Obama administration's top economic diplomats. "On one hand, the
global system won't work well if we and China can't cooperate and
productively resolve our differences. On the other hand, we have real
differences, many of which are awfully difficult to resolve."
TENSIONS MOUNT
The U.S. complaints about China are well known -- widespread theft of
intellectual property, a lack of transparency about its regulations,
missed WTO deadlines for opening markets, foot-dragging in allowing
its currency to rise in value and subsidies such as low-interest
state loans that favor domestic industries.
China argues that as a developing economy, it needs to protect its
nascent industries and help them grow. It also retorts that the
United States blocks its companies in key sectors.
Huawei Technologies, for instance, withdrew its $2 million bid this
year for 3 Leaf Technologies when the U.S. government raised national
security concerns, and oil giant CNOOC canceled an $18.5 billion bid
for American oil company Unocal Corp in 2005 after a political
backlash in the United States.
As trade frictions grow, corporate America for the first time is
publicly voicing concern that the trade deal with China is lopsided,
and pressure is building on President Barack Obama to toughen his stance.
Jim McNerney, Boeing Co's chief executive, touched upon the issue in
November, speaking of a "dilemma" in China relations when he asked
Obama at the APEC business summit how he would assess the U.S.-China
relationship when both the left and the right are calling for a harder line.
Obama gave his administration's standard response of pursuing
constructive engagement and a strong policy with a key partner, but
the subtle criticism appeared to have hit home. Later, after a
private meeting with Chinese President Hu Jintao, he called for China
to stop "gaming" the world trade system.
Business can be a far more powerful lobby than trade unions, the
traditional voices that have complained of China's trade practices.
Its influence, particularly in a presidential election year, could
lead to increasingly adversarial relations.
"The level of business support for stable U.S.-China relations is
beginning to fracture," said Nick Consonery, China expert at the
EurAsia Group, a political risk institute that works closely with corporations.
"It is definitely happening because the business perspective is
changing and they are less willing to get out in front of (and
support) the administration's 'strong and stable' relationship."
In October, the U.S. Senate passed for the first time a bill designed
to punish Chinese imports with levies, unless China allows its
currency to rise more rapidly in value. Many U.S. economists and
lawmakers believe China's yuan is kept artificially cheap by as much
as 10-25 percent -- another subsidy to Chinese exporters that helps
them undercut foreign competition.
Never before has a currency measure, brought forward multiple times
in the past, won U.S. Senate support. No action has yet been taken in
the U.S. House, where it is expected to founder.
BUSINESS COMPLAINS
The policy that perhaps most frustrates American business stems from
a 2008 announcement by China's State-Owned Assets Supervision and
Administration Commission. It identified "economic lifeline" sectors
that China says it must dominate.
The list is long -- aviation, air freight, coal, oil and
petrochemicals, power generation, telecommunications and weapons.
Industries such as chemicals, equipment and auto manufacturing,
electronic communications, steel and nonferrous metals are set as
state controlled to varying degrees. These state-owned enterprises
enjoy a monopoly or oligopoly in the Chinese market; subsidies for
land, water and power; and below-market cost of capital.
Until recently, American business leaders had been loath to speak of
China's practices for fear it would lose them lucrative contracts or
result in regulatory scrutiny that harms their China operations.
Several have gone public in the past few months.
"The Chinese government is not going to allow a non-Chinese Internet
company to succeed... It is a weapon in the 21st century national
security games," eBay Inc chief executive John Donahue said in
October at a Web 2.0 summit.
EBay has abandoned its efforts to build a Chinese marketplace where
people bid for goods online after it ran into stiff competition from
a free Chinese site. Its new strategy is to sell goods from Chinese
companies to international buyers. "It was about finding a business
model that works in China," said Daniel Feiler, spokesman for its
China operations.
Google Inc. last year pulled back to Hong Kong on concerns Chinese
were hacking the Internet search giant and a row with China over censorship.
Jeffrey Immelt, chief executive of General Electric Co which has
multibillion dollar contracts in turbines, railroad engines and
aircraft parts with China, also faced choices in how to compete. "The
notion was, if we're part of the Chinese economy, we should be allowed to win."
But finding ways to win means that companies have to avoid
confrontations with Chinese authorities, he said. "We're not naive or
stupid about these things. We really do think a lot about it," said
the CEO, who advises Obama on business competitive issues. "There is
a multitude of ways to succeed in China."
China's policies have helped vault its industries to global
prominence. It has 61 companies today among the global Fortune 500
list, almost quadruple the number in 2005. The U.S. tally over the
same period has fallen to 133 from 176. What American business finds
disturbing is that most of the Chinese companies are state-owned,
including the three in Fortune's Top Ten -- China Petroleum and
Chemical Corp, China National Petroleum and State Grid.
The U.S. Chamber of Commerce said in a joint report with the
Coalition of Services Industries that China and other countries
lavish regulatory favors and generous subsidies on their state-owned
firms, making it very difficult to compete.
"No adequate and effective international disciplines now exist to
deal with this problem," it said.
FIGHTING BACK
In the past three years, the United States has brought five cases
against China at the WTO, more aggressive than the seven cases during
the eight years of former President George W. Bush's administration.
By March 2010, the United States had won three WTO cases against
China, four were resolved before WTO action, and four were pending.
Apart from negotiations at WTO complaints, the United States also is
working to draw other big Asian trading nations into regional or
bilateral trade pacts, which are designed to open markets and serve
as a hedge or counterweight against Chinese trade policies. It
ratified a free trade agreement with South Korea recently and has
breathed new life into the Trans-Pacific Partnership (TPP), a
9-nation free-trade group that gained new heft in November when
<http://www.reuters.com/article/2011/12/09//places/japan>Japan,
Canada and Mexico announced plans to join negotiations. U.S.
officials want TPP to set new standards on free trade and become a
template for future international trade deals.
What remains unclear in Washington is whether China's new leadership
in 2012 will resume market opening or turn further inward.
The country took a huge leap in the 1990s as it prepared for WTO
entry, slashing red tape, removing layers of protection for domestic
factories and farms and opening its markets. That work is widely
credited inside and outside China with turning the country into the
industrial dynamo of today.
The U.S. ambassador to the WTO Michael Punke said China made
"impressive steps" to bring its laws and regulations into line with
global rules in the five years after WTO entry.
Some trade experts say reform fatigue then set in and they expect
opening measures to resume. Other U.S. experts say China turned away
from market liberalization as early as 2003, when the reform-minded
team of President Jiang Zemin and Premier Zhu Rongji retired and
handed power to the more cautious current leadership of Hu Jintao and
Wen Jiabao, respectively.
"Nobody who was watching China enter the WTO back then saw this
change coming," said China trade analyst Derek Scissors of the
Heritage Foundation. "It was as if a different government with
different priorities came in," he said.
Hu and Wen are due to retire from their state posts in March 2013 and
hand over power to successors, most likely led by current Vice
President Xi Jinping. The next generation of leaders has not
expressed economic or trade policy views that depart from current
statist orthodoxy, and are expected to proceed cautiously once in power.
The cost could be high, said Long Yongtu, who negotiated China's WTO
entry in the late 1990s. He told a recent symposium he was extremely
worried that "essentially, after 10 years, it seems China is drifting
away from the WTO."
A statist model that denies fair competition for all enterprises,
domestic and foreign, could stifle China's economic growth, Long said.
"We cannot only have large-scale and state-owned enterprises. That is
only the skeleton of the economy. We need thousands upon thousands of
small and medium-sized private enterprises. They are the flesh and
blood of the Chinese economy."
(Additional reporting by
<http://blogs.reuters.com/search/journalist.php?edition=us&n=doug.palmer&;>Doug
Palmer and Michael Martina. Writing by Stella Dawson; editing by
<http://blogs.reuters.com/search/journalist.php?edition=us&n=william.schomberg&;>William
Schomberg and
<http://blogs.reuters.com/search/journalist.php?edition=us&n=brian.rhoads&;>Brian
Rhoads)
Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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