Saturday, July 14, 2012

The USA China-bashing syndrome

Both parties are cranking up their rhetoric against the world’s second-largest economy

IT IS a truth universally acknowledged that a man in possession of a major American political party’s presidential nomination must be in want of a more assertive policy on China. Bill Clinton upbraided George Bush senior for “coddling dictators”; Mr Bush’s son went on to accuse Mr Clinton, when president, of much the same thing. Barack Obama, during his first presidential campaign, called the younger Mr Bush “a patsy” in his dealings with China. Now it is Mitt Romney’s turn: in February he described Mr Obama as a “near supplicant to Beijing”.

Mr Romney, as befits the author of a book called “No Apology: The Case for American Greatness”, says that if elected he would not hesitate to put China in its place. On his first day in office, no less, he has pledged to declare it a currency manipulator, a step that could lead to across-the-board tariff increases on Chinese imports. More broadly, he says he will force China to play by the rules of international trade and investment: no more theft of intellectual property, no more unfair subsidies for state-owned firms, no more predatory pricing. And economics is not his only concern: he promises to chastise China more loudly for its human-rights abuses and to bolster America’s armed forces to counteract China’s growing military clout.

As in most things, Mr Romney’s China-bashing seems studied and methodical. He would like rich countries to impose “intellectual-property sanctions” on China, to prevent it from acquiring the advanced technology behind such things as passenger jets until it stops pilfering foreign know-how. Under the heading “Confront China Directly”, his website pledges to end government procurement from China until China provides reciprocal access to American firms. Taiwan, he says, should be allowed to buy whatever weapons it wants. Meanwhile America’s navy, he calculates, needs to build an extra six ships a year to handle all the challenges it faces, including an uppity China.

Mr Romney mocks the suggestion that he is gunning for a trade war (let alone a conventional one). An undeclared conflict is already under way, he suggests, and China is winning. Moreover, if America imposed punitive tariffs on Chinese goods, he argues, China would not dare to retaliate in kind because it has more to lose from an escalation in hostilities. China is selling America, he notes, $273 billion more per year than America is selling to China. “If you’re not willing to stand up to China, you’ll get run over by China,” he insists.

The obvious response to all this is to shrug. Candidates may rage about China on the campaign trail, but when in office they become more temperate. Four years ago Mr Obama promised to do just as Mr Romney now demands, and label China a currency manipulator. Twice a year since then he has passed up the opportunity to do so. In part, that is because China’s currency has been appreciating in recent years, and its global trade surplus shrinking. But mainly it is because picking a fight with an all-important trading partner, and the biggest foreign holder of American public debt, does not seem a bright idea when you are the one who will be blamed for the economic consequences.

If even a former community organiser shies away from a showdown with China, the assumption runs, then a pin-striped man of finance certainly will. There are plenty of ways out of the hole Mr Romney has dug for himself. He could say that as a result of the pressure he has brought to bear, China has made such great strides that the penalties he envisaged are no longer warranted. Or he could keep his pledge, and brand it a manipulator, while making sure that the bureaucratic procedure that would then follow did not lead to any actual retribution. So far, there does not seem to be much sense of alarm emanating from Beijing. Even as Mr Romney was cranking up his rhetoric earlier this year, the man who is expected to become China’s next president, Xi Jinping, visited Washington and described ties between his country and America as “an unstoppable river that keeps surging ahead”.

Words have consequences, too

In fact, the risks could be a lot greater than that. China, like America is in the middle of a transition of leadership; and being branded as a manipulator could easily risk a nasty response. For another thing, Mr Romney’s words set up a dynamic whereby candidates try to outdo one another with their China-bashing. Earlier this month, when the administration unveiled a complaint about Chinese car tariffs before the WTO, the president’s campaign proudly noted that he had initiated such proceedings twice as often as his predecessor. The Republican Party immediately retorted that Mr Obama was nonetheless a late convert to the cause, and should have been challenging China more often.

Indeed, fewer and fewer Republicans are letting their supposed belief in free trade interfere with an easy shot at the president. Mr Romney is actually among the milder ones. Donald Trump, while flirting with a run for the Republican nomination last year, said, “China is raping this country.” Newt Gingrich, who did run, argued at a debate among candidates that it was important “to dramatically raise the pain level for the Chinese cheating”. Michele Bachmann, another candidate, quipped that China’s purchases of American Treasury bills brought a whole new meaning to the phrase “Hu’s your daddy?”

The trouble with such talk is that it reinforces the feeling among China’s leaders that America is out to thwart their country’s “peaceful rise”. The fact that both parties are happy to portray China as the bogeyman of globalisation creates an impression of uniform hostility. That, in turn, undermines America’s message that China is unduly paranoid and defensive. It also disenfranchises those American voters who would like to express a more optimistic view of the consequences of commerce.

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