BUFFALO — President Obama's upcoming visit to China is an opportunity for the U.S. to deepen its Chinese relationship and pursue a more sincere partnership.
Why? The two economic superpowers are increasingly dependent on each other and will be for decades to come.
The United States needs China to continue financing its debt; China needs U.S. markets to sell its goods. But there's much more.
Since China joined the World Trade Organization in 2001, U.S. exports to China have risen 273 percent as compared to 78 percent for the rest of the world. And that growth is likely to continue because Chinese consumer demand is predicted to rise from eight percent of global demand today to 31 percent by 2020, according to a Credit Suisse report.
China also is an important ally in the effort to fight global terrorism, denuclearize North Korea and promote environmental initiatives. But challenges could derail our relationship.
Chinese intellectual property piracy, product safety, market access and human rights issues remain problematic. To remedy this, we should continue a policy of constructive engagement and urge China to become a more responsible global stakeholder.
Other issues, which remain a concern, need to be viewed in a broader context.
For example, since July 2005 when the Chinese exchange rate regime was adjusted, their currency, the renminbi, has appreciated 18 percent.
Although it's still undervalued, giving Chinese companies an advantage, a floating renminbi likely would lead to instability. And right now we need a stable China to help pull the world out of recession. Former British Prime Minister Tony Blair expressed it well: “Chinese disorder is their enemy and ours."
In reality, a higher-valued renminbi, and in turn, more expensive Chinese products would not eliminate our trade deficit. Other low-cost nations would simply fill the gap.
Most aren't aware that the proportion of our global trade deficit coming from Asia, including China, is actually less than a decade ago.
The U.S. trade deficit with China reflects changing Asian trade patterns not revealed in statistics. Instead of flowing directly to America, today much of Asia's exports first go to China for assembly and then to the rest of the world. As a result, about half of "Chinese exports" to the U.S. are not of Chinese origin.
To further accelerate the pace of Chinese reform — which compared to other nations has been astounding — many want President Obama to adopt a confrontational strategy and brand Chinese imports as bad. This will only result in a hostile China, which is contrary to U.S. interests. Plus, it hurts American consumers.
For instance, President Obama's recent decision to implement a 35 percent tariff on cheap Chinese tires — which was not supported by U.S. tire producers—has raised prices forcing many consumers to keep worn tires on their cars longer. And this will not create more manufacturing jobs in America. U.S. producers don't want to make low-margin tires. Instead, tire imports from Indonesia, Mexico and Brazil will rise.
Lower-cost imports from China or elsewhere subsidize living standards for many of America's lower and middle-class consumers, who can stretch their dollar further at retailers like Walmart.
And low-cost Chinese imports aren't the reason U.S. manufacturing jobs have declined. The real culprits are technology and productivity, which enable fewer workers to produce more products faster.
China has 20 percent of the world's population and soon will surpass Japan to become the second largest economy. It's also our third largest export market. American companies need continued access there so more higher-technology, higher-paying jobs are created here.
We need to work constructively with China to overcome obstacles. We need to better understand what's at stake.
The bottom line: How we view China today will determine whether we are friends or enemies tomorrow. And friends can accomplish a lot more than enemies.
John Manzella is president of Manzella Trade Communications and host of The Manzella Report, a nationally syndicated radio commentary. Readers may write to him at 80 Sonwil Drive, Buffalo, N.Y. 14225 or John@ManzellaTrade.com.
