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December 19, 2003
Wrinkles in US-China Relations
President Bush and Premier Wen Jiabao have both underplayed wisely the irritants in the US-China relations in their statements to the press following their talks on December 9, 2003.
President Bush cautioned Taiwan against proceeding with its projected referendum that China regards as provocative. “We oppose”, he declared, “any unilateral decision by either China or Taiwan to change the status quo”.
The referendum set for March 20, 2004 seeks the approval of the Taiwanese for calling on China to withdraw its missiles aimed at the island and to renounce the use of force against it. Prime Minister Wen has reiterated his country’s policy of peaceful reunification of Taiwan and of one country, two systems.
The US policy on the future of Taiwan has been deliberately kept ambiguous. On the one hand, the US claims that it adheres to the one-China policy and opposes an independent Taiwan but on the other hand it has been selling substantial weapons under the umbrella of “Taiwan Relations Act” that admits of such sales.
The President’s warning to Taiwan against the referendum is, however, no indication of a substantive shift in the US policy towards that island which is at present neither an independent state nor a component of Mainland China. However, the situation on the ground is developing in favor of the Mainland. Taiwanese businessmen are making massive investments in the vast opportunities opening up in China. The developing vested interest will eventually take care of this issue.
Chinese leadership is hardly impetuous; they waited for decades for Hong Kong to join their fold. They would warmly welcome Taiwan if it seeks reunification tomorrow, but they would not pressure it or provoke any third country to achieve that objective. Taiwan, though a sore point in US-China relations, is therefore not a major cause for conflict.
Deep wrinkles in their relations have, however, developed in the economic field. China has already emerged as the manufacturing floor of the world. Chinese labor is skilled, proficient and willing. Above all, it costs just a fraction of what it does in America. Major American corporations have thus shifted their manufacturing units to China. This has resulted in the loss of some 2.8 million jobs - one in six - over the past three years.
Goods manufactured in China have flooded the US market and at prices consumers love and American manufacturers hate as they cannot match them. Wal Mart alone is importing $1.5 billion worth of merchandise from China.
China is being accused of having stolen American jobs and having caused the shuttering of many small manufacturing firms. Major corporations on the other hand are doing a roaring business and expanding their margins of profit. They have set up manufacturing units there and are supplying their products under their own brand names to not only the US market but to all parts of the world.
This situation is possible and inherent in the current global economic system called globalization. But, some politicians are accusing China of cheating in trade by artificially keeping its currency, the Yuan, at an undervalued fixed rate of exchange making the country’s products much cheaper for American importers.
China had a massive trade surplus of $103 billion last year and is projected to top $120 billion this year.
This is no doubt a major cause of concern for American leadership. President Bush has been suggesting to Chinese leaders whenever he gets an opportunity to either raise the value of their currency by up to 40% or let it float like other world currencies. The Chinese are unwilling to do that as they contend that it would not solve the problem but would merely destabilize their currency and economy.
They point out that the rate of exchange has remained pegged at Yuan 8.25 to $1.00 since 1994, for almost a decade now. They have not been tinkering with it for immediate or short-term gain. If it is allowed to float, there is as much possibility of its going down in value further. If it is allowed to continue at a pegged rate of exchange but at a higher value, not only the Chinese export trade will go down but also the profits of American corporations in equal measure. The US administration is under pressure from American corporations too to avoid insistence on revaluation of Yuan. For, they stand to lose.
The Chinese argue that the American authorities and exporters should find ways of increasing their exports to China. They would like the US to lift restrictions on the export of high-tech equipment to China. That would increase US exports and rectify the adverse balance of trade. To be able to do that, the US would have to re-evaluate its strategic and other considerations.
This is no doubt a ticklish problem, but with goodwill on both sides some via media, some log-range accommodation, could perhaps be worked out.
China and the US are the two dominant players in the world today and their relations constitute the fulcrum for enduring peace. After almost two centuries of continuous decline, China has over the past few decades repositioned itself to restore its 4,000-year-old status of a great civilization. The US has over the past century or so become a science and technology powerhouse that eventually turned it into the sole super power. China now has the largest number of scientists in the world less than 30 years of age. Chinese students are the largest ethnic group in graduate schools in the US.
The US is a relatively young society based on individualism, China is the oldest continuous society based on social hierarchy. Addressing their mail, the Chinese put the country first, province next, then city, street name, house number and finally the name of the recipient.
China has five times the population of the US but one fifth of its cultivable land. The US is a land of immigrants who sought freedom and opportunity in a new world: China is a land of emigrants with sizable overseas Chinese communities all over the world, in South-east Asia in particular. The US is a melting pot of different immigrant cultures; China strictly safeguards its cultural mainstream by keeping its 55 minorities from assimilation by law, policy and practice. In the US, wealth ranks higher than power; in China power comes first and it leads to pelf.
The two nations are intrinsically different despite the infatuation of the Chinese youth with American films stars and fashions. Yet national differences need not be the cause of irreconcilable conflict. Mutual respect and symbiotic tolerance can promote all round good will, progress and peace. More wars have been fought between nations practicing similar political ideologies than between nations adhering to different political and cultural creeds.
It is gratifying to witness the leaders of both China and the US avoiding meticulously the path of friction and working instead on smoothing out the wrinkles as they appear in their relations. The current visit of the Chinese Prime Minister strengthens this impression.
(The writer is a retired civil servant living with his sons in California. He has served in his country’s Information posts in Ottawa, Jakarta, Bankok, Ankara and Colombo. He may be reached at:arifhussaini@hotmail.com December 11/03)
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