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China Play in US Election

US politicians often gripe about China, but campaign promises to “get tough” aren’t easy to keep. China is the third largest export market for US products. The Obama administration has already heightened enforcement of trade laws and filed more trade complaints than the previous administration. Even so, Mitt Romney’s website suggests that the Obama administration extends “acquiescence to the one-way arrangements the Chinese have come to enjoy”; Romney promises a tough stance, including a willingness to “walk away” from unsatisfactory negotiations. Trade expert Edward Gresser warns tough policies, including declaring China a currency manipulator, could result in an “irreparable breach in the larger relationship with China.” Tensions run high over North Korea nuclear weapons development, maritime sovereignty and climate change. Chinese elites may worry that Republicans will do to China what they’ve done to domestic opponents – oppose everything China wants. China may be accustomed to the campaign rhetoric, or could decide to “walk away” first from a dysfunctional, polarized, deficit-ridden partner, insecure about its own decline and intent on dragging others down with it. – YaleGlobal

China Play in US Election

Romney promises tough trade stance, but China could give up first on troubled partnership
Edward Gresser
YaleGlobal, 15 October 2012
The China Syndrome: Republican candidate Mitt Romney uses China stick to beat President Obama (top); China’s exports to the US are on the rise (below)

WASHINGTON: It’s a familiar tableau in American presidential campaigns: The party out of power runs against China policy and promises a tough new approach; the administration in power does its best with an unsatisfactory relationship. Mitt Romney is no different. His website proclaims:

    "It is time to end the Obama administration’s acquiescence to the one-way arrangements the Chinese have come to enjoy. We need a fresh and fearless approach to that trade relationship. Our first priority must be to put on the table all unilateral actions within our power to ensure that the Chinese adhere to existing agreements. Anyone with business experience knows that you can succeed in a negotiation only if you are willing to walk away. If we want the Chinese to play by the rules, we must be willing to say 'no more' to a relationship that too often benefits them and harms us."

Once alarmed by this sort of rhetoric, China now just sits back and waits for election season to pass. In 1979 Ronald Reagan accused Jimmy Carter of humiliating Taiwan and promised to renew official relations. In 1992 Bill Clinton proposed raising tariffs on Chinese goods to force the “butchers of Beijing” to reshape the Chinese political system. Romney’s rhetoric this autumn focuses on economics rather than on high strategy or human rights, but promises an equally drastic reshaping of trade with China.

Once in office, Reagan and Clinton glumly concluded that the big changes they had promised would do more harm than good, and quietly dropped them.

Would a Romney administration be any different? Perhaps – but if there’s to be a real breach, it will probably come from a different source.

American-Chinese ties have been uneasy for a generation. This is probably inevitable, given the mesh of
prickly issues.

Step back a bit for some perspective. American-Chinese ties have been uneasy for a generation. This is probably inevitable, given the mesh of prickly issues surrounding the relationship – an unfriendly accommodation on the status of Taiwan, an alloyed cooperation over opposing North Korea’s nuclear program, growing concerns about muscular Chinese approaches to maritime sovereignty, as well as the intellectual property piracy and currency issues that Romney raises, or concerns over cyber-espionage and hacking of US government and company computers. And an often bad relationship may have structural reasons to worsen.

In a remarkable Brookings Institution dialogue, Addressing U.S.-China Strategic Distrust, Chinese scholar Wang Jisi describes a mindset among Chinese government and scholarly elites that could easily push the relationship into crisis. He describes a consensus, or near-consensus, in Beijing that the structure of global politics makes a basically cooperative relationship all but impossible:

    “America’s financial disorder, alarming deficit and unemployment rate, slow economic recovery and political polarization are viewed as but a few indicators that the United States is headed toward decline. … It is strongly believed in China that the ultimate goal of the United States in world affairs is to maintain its hegemony and dominance and, as a result, Washington will attempt to prevent the emerging powers, in particular China, from achieving their goals and enhancing their stature.”

If Wang’s description is accurate – with a confident and suspicious Chinese elite, viewing the United States as inevitably driven to oppose Chinese goals based on a fear of losing power, and basing their own decisions on this premise – then the future is likely to be difficult regardless of American policy choices.

Chinese elite may view the United States as inevitably driven to oppose Chinese goals based on a fear of losing power.

But if American choices over the next year are the decisive factor, then the future is likely to be much like the past two decades – mixing suspicion with cooperation, mutual economic dependence with arguments over policy.

A recent in-depth study of American opinion on China, conducted this summer by the Pew Research Center, reveals a public sympathetic to abstract calls for “toughness,” but uninterested in a fight. Pew found that 45 percent of Americans want a “tougher” China policy, but 39 percent say the Obama administration’s approach is “about right.” Likewise a very large majority of the public, 86 percent, considers it “very important” or “somewhat important” to be tough with China on economic issues; but an even larger majority of 88 percent maintains that it is “very important” or “somewhat important” to build a strong relationship with China. The picture, then, is of a public that’s not totally satisfied with policy, but by no means wants to walk away.

In practice – though with one big exception – the actual proposals that follow Romney’s threat to walk away fall far short not only of “fresh and fearless,” but of policy that differs much from the president’s. Romney’s campaign document includes five points:

  • A pledge to “designate China a currency manipulator and impose countervailing duties”;

  • A promise to spend more money for the US Customs Service to inspect imports;

  • A similar promise to spend more money through the US Trade Representative Office to file    lawsuits at the World Trade Organization;

  • A pledge to “use unilateral and multilateral punitive measures to deter unfair Chinese                practices,” which is ambiguous but appears to mean enforcing anti-dumping laws;

  • An end to US government procurement from China until China commits to join the WTO’s  Government Procurement Agreement.

A 20 percent countervailing duty could spark genuine trade war, a prospect that’s perhaps not so much “fearless” as “reckless.”

Most of this sounds modest and technical – and it is. More striking still, it’s mainly a list the Obama administration has already accomplished. A quick trawl through WTO dispute filings, agency budgets and Commerce Department trade litigation show that since 2009 the Obama administration has added trade enforcement staff, filed eight WTO cases against Chinese policies in four years – one more than the seven the Bush administration did over its eight years in office, and imposed 39 anti-dumping and countervailing duty penalties on Chinese imports, which is not far below the 50 the Bush administration did over eight years.

In effect, most of Romney’s proposals are promises to continue the Obama administration’s policy. The exception is Romney’s plan to declare China a “currency manipulator” and impose an across-the-board “countervailing duty” – a big tariff – on Chinese goods.

This is almost identical to the promise Bill Clinton made to withdraw most-favored nation tariff status in 1992. The average US tariff on Chinese goods is about 3 percent, and last year we bought $400 billion in goods from China. A 20 percent countervailing duty – to choose a figure matching common guesses at the degree of currency misalignment – would at face value mean an $80 billion penalty. This is nearly three times the size of the entire $29 billion US national tariff system, easily enough to spark a genuine trade war, a financial shock and an irreparable breach in the larger relationship with China.

The prospect is perhaps not so much “fearless” as “reckless.” In the end, even if wins, the measure seems unlikely to be taken – just as Clinton and Reagan rethought their campaign rhetoric after taking office.

So, should observers, particularly those in China, then discount the campaign’s China debate as simply a tired repeat of the past? Not entirely – fearless but ill-advised promises often can lead their authors into traps of credibility and face, and human beings often miscalculate. But they should at least be skeptical. And if Chinese scholar Wang is right, the greater possibility of a permanent breach looks likely to come from the other side of the Pacific.


Ed Gresser directs ProgressiveEconomy, a trade and global-economy research program at the GlobalWorks Foundation in Washington, DC. The author will field readers' questions for a week after the publication date.

Rights:Copyright © 2012 Yale Center for the Study of Globalization

Comments on this Article

25 October 2012
I may have said this before. I think there are far more reasons than there are not for why China will not be a big power surpassing the United States or smaller contries combined. China has a lot of afflictions inside.
Dr. John Lee, the author of "Will China Fail?", is a visiting fellow at the Centre for Independent Studies, Sydney, and a visiting scholar at the Hudson Institute, Washington, D.C. I think he reads China like the palm of his hand. Many of his essays are available online at these institutes.
-Yoshimichi Moriyama , Unnan City, Japan
20 October 2012
I agree to the points that Mr. Dapice raised such as "the export/GDP ration of the US and of China...," "China's holdings of dollar based assets would plunge...,etc."
But China has an unusual source of unusual strength, which the united States lacks. It is what may be named the unusual domestic political power of China.
Let's have an imaginary game: In the coming economic battle, China would lose five hundred million jobs, and the United States five million. (Of course other countries like Japan and EU would not suffer in this simlified game. If they did, this game would be too complex to play.) In such an imagined situation, authoritarian China could leave the five hundred million people and their families simply suffer as they would suffer or leave them take care of themselves as they would like. In America as a democracy President Obama or President Romney could not and would not leave the five million and their families simply jobless, breadless and butterless.
-Yoshimichi Moriyama , Unnan City, Japan
15 October 2012
The export/GDP ratio of the US is 15% and of China 30%. China would suffer far more from a trade and currency war than the US would. Its holdings of dollar based assets would plunge in real value and the impact on its economy would be absolutely and relatively larger from reduced exports. The US exports to China are only about one-quarter of China's exports to the US, and our economy is more than twice as large. In addition, we can source from other nations for many of our imports more easily than China can replace US exports. Any such conflict would hasten the movement of FDI to other places, moving "China +1" to "Other places than China" - such as Southeast or South Asia or Latin America. This does not contradict your main point - foolish campaign rhetoric is a poor guide to future actions that only promise mutual pain. The US could gain from the desire of many Chinese companies to invest outside of China. However, the fact that many of them are state-owned will raise security concerns, as the recent report on Huawei (an electronics firm with origins in the state security system) suggests. Overall, we will probably have to wait for both political transitions to settle down before any prospect of rational negotiation becomes evident.
-David Dapice , Tufts University