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The United States and China have been engaged in a dance over trade for some time now. One of Washington’s periodic moves has consisted of advocating a symbolic anti-China gesture aimed at appeasing anti-China factions in the United States.
Until now, these threats have wound up costing China relatively little. And a trade war over intellectually property rights or glossy paper used by magazines is not about to wreck the U.S.-Chinese relationship. Even so, the dynamic behind the trans-Pacific dance has begun shifting.
The latest trade flare-up between the United States and China is related to the next Strategic Economic Dialogue summit in Washington, where U.S. Treasury Secretary Henry Paulson and Chinese Vice Premier Wu Yi will meet for talks May 23-24. It also is related to the upcoming expiration of U.S. President George W. Bush’s trade authority, the renewal of which Congress is currently considering. Both deadlines have ramped up pressure on the White House (and hence on U.S. Trade Representative Susan Schwab) to act more aggressively against China’s so-called economic misdemeanors.
Both sides have strong motivations to keep the U.S.-Chinese relationship stable. China depends on the U.S. export market (its largest) to generate jobs for its workers, while U.S. creditors and businesses with investments in China depend on continued Chinese economic growth and social stability. Beyond trade, numerous other ways in which the two nations are interdependent are at play, such as Beijing’s ability to influence North Korean leader Kim Jong Il in the current round of six-party talks.
Ever since the Democrats assumed control of the U.S. Congress in November 2006, Beijing has anticipated an end in the win-win consensus-style dialogue that Washington has adopted on economic disagreements post-Sept. 11. Beijing sees that the U.S. administration’s ability to fend off congressional pressure for more aggressive action against China is in decline. The U.S. Commerce Department’s decision to reverse a decade-long policy March 30, whereby China received nonmarket-economy status on certain issues, reveals this trend.
What China fears most, however, is the day Congress or U.S. interest groups successfully coerce the Office of the U.S. Trade Representative into enacting legislation that could substantially undermine continued Chinese economic growth. A tariff on China’s biggest employing sectors, like machinery manufacturing, would be one example. As such, Beijing already is revving up the pace and intensity of its response to pre-empt potential U.S. trade action.
Intellectual property rights (IPR) have always grabbed U.S. media attention, with China typically cast as the villain. U.S. charges that China has allowed IPR violations are motivated more by politics than by economics, as evidenced by the relative lack of attention the United States pays to other equally situated, if not worse, offenders.
But IPR have always been superficial to the core U.S.-Chinese economic relationship. Therefore, words and actions taken by either the Chinese government or the U.S. administration on the subject typically have been aimed more at appeasing U.S. interest groups rather than at quashing the problem.
Beijing has recently intensified its public relations campaign designed to show the United States how much it is doing to address the intellectual property issue. Four days after the United States lodged two IPR-related complaints against China with the World Trade Organization (WTO) on April 10, Gansu province ordered workers to burn 1.06 million pirated audiotapes and videotapes. On April 16, the National Working Group for IPR Protection published the country’s “Top 10 IPR Protection Events of 2006.” Local media have been falling all over themselves to list China’s countless IPR protection accomplishments. This is not the first time China has made such gestures, but the intensity and pace of this latest drive is noticeably higher.
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