Our new diplomatic partner
Chinese Premier Wen Jiabao concluded his first visit to the United States last week, calling his whirlwind three days here both pleasant and very successful. President Bush gave Wen a warm White House welcome, including a 19-gun salute. Bush also offered a plea to Wen to reverse the huge trade deficit with China, which is quickly becoming a political vulnerability in the president's re-election bid.
Bush also gave the world new rhetoric to describe U.S.-China relations. The president, who once described China as a strategic competitor, this week declared that China is our "partner in diplomacy." In an almost immediate confirmation of that partnership, the president emerged from his discussions with Wen to warn Taiwan's President Chen Shui-bian not to hold a referendum on condemning China's buildup of ballistic missiles across the Taiwan Strait.
I talked with Wen in Boston at the conclusion of his visit. And in his only interview with an American journalist, he told me, "We appreciate the reaffirmation by President Bush of his one-China policy and for his sending a clear signal to Taiwan security forces." Wen added, "We respect the desire of the Taiwan people to develop and pursue democracy. However, we firmly oppose the attempts by certain separatist forces in Taiwan to pursue Taiwan independence under the disguise of promoting democracy in an attempt to cut off Taiwan from the mainland."
On the no-less-difficult issue of North Korea, the United States definitely needs its "partner in diplomacy." Wen, with his engaging personality and direct language, conveys a sense that the rhetoric of diplomatic partnership between the two countries could ultimately approximate reality. The Chinese premier said his government shares the U.S. goal of eliminating North Korea's nuclear weapons program and will continue leadership in moving forward the six-party talks with North Korea.
"We have to admit . . . in our economic and trade relationship problems do exist," the premier said. Problems, indeed. Not only is our trade deficit with China likely to end the year at over $130 billion, but thousands upon thousands of high-value American jobs have been lost to Chinese imports and competitors. China has again rebuffed the U.S. call to abandon the peg of the yuan to the dollar. And the United States has just slapped quotas on Chinese textiles.
Mutual interest. Premier Wen insisted that the rapid expansion of trade has benefited both countries. As you might expect, he suggests the solution is not to cut Chinese imports but rather to increase U.S. exports. Wen outlined five proposals to Bush, including better communication on bilateral commerce and trade. Wen told me, "We [should] seek mutual benefits and win-win results. We should look at the larger picture and larger interests of our trade for each country." Chinese officials ambitiously estimate that they will import up to $1 trillion of U.S. merchandise in the coming three years.
Unfortunately, trade inequities with the Chinese are only a fraction of the trade issues facing this country. Trade with China makes up only about 25 percent of America's enormous half-trillion-dollar annual trade deficit. And the biggest U.S. trade deficit increase over the past five years has been with the European Union, not with China. Trade analysts say that China, members of the EU, and several other countries are merely doing what any country would do given the opportunity. They say the lack of strong U.S. trade policy is the problem. William Hawkins, senior fellow at the U.S. Business and Industry Council Education Foundation, says, "Since the industrial revolution, most countries follow policies geared to benefiting their domestic industries, either by boosting their exports or their competitiveness or by putting obstacles in the path of imports from rivals."
But rather than strictly enforcing our trade laws, we accept goods on a largely unrestricted basis from cheaper foreign markets. Multinational firms continue to open operations in low-wage China instead of this country. In fact, China surpassed the United States as the most popular destination for foreign direct investment last year. And 10 of China's top 40 exporters are U.S.-based companies like Motorola.
"We've essentially given our trade policy over to transnational corporations who do not have an interest in the United States or interest in any particular country," says Hawkins. "They're interested only in their own advancement." And he adds, "Because of that, we don't have any part of our government, any agency, any committee that thinks seriously about the future of our economy or its competitiveness."
The Chinese are obviously thinking seriously about the future of their economy. Once again, the United States is running a serious deficit.
This story appears in the December 22, 2003 print edition of U.S. News & World Report.