Strains in Trust: US-China Relations

- Dr. Abdul Ruff Colachal

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[After a strong push from Bushdom leaders for closer ties with an already semi-communist Beijing, President Obama's administration held its first revamped Strategic and Economic Dialogue with China in July, focusing on bilateral, regional and global challenges on economic and foreign policy issues, as well as climate change]

                                             ONE

A collapsing capitalist giant USA and one of the emerging capitalist nations China have been facing sweet and sour relations because both want to expand their trade to their own advantages. Having managed to gain access to World Trade Organization (WTO) with American unwilling support, China is pushing through its economic agenda while America seeking to decommunismize China, is feeling the economic pinch very badly. China has now become the largest trade partner for Japan, surpassing the United States. For China, Japan, arguably the most energy efficient country in the industrial world, is the third largest trade partner after the European Union and the United States. The US-China relations develop to promote individual interests, rather than bilateral needs and the US behaviors are in congruity with their national economic, political or defence matters.

The age of state terrorisms has helped the nations with antagonistic programs and agendas and US-China relations also took advantage of the emerging terror situation. While China is eager to expand its economic and military power beyond Asia by conducting trade with USA and other western powers, America�s China policy has been one of trying to bend the communist regime to dance to western tunes and it used economy as the start point to make friend with China during the cold war season. By supporting China against its so-called ideological war with the former Soviet leadership, USA successfully got the market economy pushed into the communist China. 

Of late, however, the speculated drifts have accrued in the ties The US has accused China of keeping the Yuan artificially high. It comes a day after the US imposed tariffs on Chinese tyre imports in order "to remedy a market disruption caused by a surge in tyre imports". China launched an "anti-dumping and anti-subsidy" probe into imports of some US car products and chicken meat. The probe follows complaints from Chinese manufacturers. They alleged the above products entered the country's markets with an "unfair competition manner", which harmed domestic industries. The case is the latest in a series of recent trade disputes between China and the US. In line with national laws and World Trade Organization rules, the commerce ministry has started an anti-dumping and anti-subsidy examination of some imported US car products and chicken meat. The Commerce Ministry said there were concerns the US imports had dealt a blow to domestic industries.

The head of China�s Congress, Wu Bangguo was in Washington in July and met US President Barack Obama and called for closer economic ties. USA had a visitor from China, Wu, the chairman of China�s Standing Committee of the National People's Congress, a weak legislature guided by the Chinese Communist Party and the first by a Congress leader to visit USA in 20 years, for his part was more focused on trade, said he wanted to see the removal of what he called trade barriers protecting US industries from foreign competition. Stressing that China's growth is linked to that of the world, he warned the US to eschew "excuses to interfere in other countries' internal affairs or contain other countries' development." Wu asked USA to remove all forms of trade and investment barriers (and) properly handle economic and trade frictions and disputes between the two sides; China "could not achieve development in isolation from the rest of the world, and world prosperity and stability would not be possible without China."

Wu also met the US Secretary of State Hillary Clinton, China and Mrs. Clinton said the US will open a dialogue on counter-terrorism issues this year. She said the two powers must cooperate closely on a wide range of topics. Clinton has previously stressed her desire for close ties and talks with China despite US concerns about rights. Speaking at a dinner hosted to welcome Wu, Mrs. Clinton said that building a strong relationship with China was a central goal of the Obama government. She avoided topics such as US complaints on Chinese trade and human rights practices, focusing instead on the need for better communication and trust. She said the countries must cooperate on nuclear standoffs with North Korea and Iran, climate change, non-proliferation, pandemic diseases and poverty reduction.  Hillary announced at a business forum attended by Wu. that the United States and China would be conducting joint talks on counterterrorism this fall.  Regional diplomats saying such talks could be the first institutionalized dialogue with China on counterterrorism. 

On her first trip as secretary of state to China in February, Mrs. Clinton called for a deeper US-China partnership. She said co-operation between the US and China on global issues such as the economy and climate change would take precedence over points of friction between the two governments, such as human rights and Tibet.

                                               TWO

The Asian economic and military giant China develops ties with both USA and Japan, the two largest economies. The present trilateral relations of Japan-US-China are stable and positive­ notwithstanding the economic difficulties all three of us are facing. Until the end of last century, there were serious trade conflicts between Japan and the United States, to such an extent that the Japanese economy was described in the United States as a major threat to its national security, replacing the Soviet Union who was no longer regarded as such due to the end of the Cold War. However, thanks to the robust recovery of the US economy with the IT revolution, the US-Japan trade conflict subsided. Also, the Japanese economy has subsequently recovered its stable growth since around 2002 by expanding its exports mainly to the USA and China, the two expanding markets in the world. Today USA, Japan and China are the largest economies.

The US imported about 46 million tyres from China last year, more than three times as many as in 2004. The Chinese share of the market went from less than 5% to 17% in that period. China's state-run media quoted experts saying that 100,000 Chinese jobs could be lost as a result of the US tariffs. Shares in US tyremakers gained on the announcement. Goodyear Tire closed 3% higher on Monday, and Cooper Tire & Rubber Co shares rose as much as 13%. But Chinese tyremakers fell. Shanghai-listed Giti Tire said the US tariffs would have a "negative impact" on its business as tyre exports to the US accounted for about 25% of its revenues last year. Separately, foreign direct investment in China rose at an annual rate of 7% to $7.5bn (�4.5bn) in August, after plunging over the previous two months, the commerce ministry said. That compares with declines of 35.7% in July and 6.8% in June.

Recently, the US has won a ruling at the WTO against China's restrictions on the import of American DVDs and other media products. The WTO ruled that China's current policy of only allowing the goods to be imported by state-run organizations broke global trade agreements. However, the WTO upheld China's limits on the distribution of US films, and made no ruling on Chinese censorship. US Trade Representative Ron Kirk called the ruling a "significant victory". "These findings are an important step toward ensuring market access for legitimate US products in the Chinese market, as well as ensuring market access for US exporters and distributors of those products," he said.

The WTO also said China was breaking trade rules by preventing US music download firms from offering their services directly to Chinese customers. Its ruling also covers the export of US books, magazines and computer games to China. The WTO said it had now instructed the Chinese government to make the required changes. China's current limitations on the import of official US DVDs and other media products has created a large domestic counterfeit industry, much to US annoyance.

China has called the tyre move by US President Barack Obama "protectionist".

The White House announced duties of an additional 35% on Chinese-made tyres for one year, followed by tariffs of 30% and 25% in the following two years. While Washington has long accused China of trade protectionism, the US is also unhappy at the high volume of Chinese exports to America, accusing Beijing of deliberately keeping the Yuan undervalued to make its exports artificially cheap.

During the Chinese-US negotiations, the US side never gave feedback on whether Chinese tyre products disturbed local markets," it added. Under pressure from US unions, the White House announced duties of an additional 35% on Chinese-made tyres for one year, followed by tariffs of 30% and 25% in the following two years. It said it was in order "to remedy a market disruption caused by a surge in tyre imports". The tariffs come under so-called "safeguard" rules introduced when China joined the WTO, to prevent the possibility of China flooding the US market with its goods. President Barack Obama is the first to use the safeguard rules. Larry Summers, director of Obama�s National Economic Council, said Washington had tried to negotiate a solution with Beijing but those talks failed. USA considers an "abdication of responsibility" to not impose the duties.

The US uses trade with human rights records to make more profits form China and has long held concerns about China's rights record, treatment of minorities, failure to protect intellectual copyright and much more. It is particularly keen to secure China's assistance in persuading North Korea to return to negotiations over its nuclear program.

                                                   THREE

President Obama also said that the USA and China needed to forge closer ties to address a host of challenges from lifting the global economy out of a deep recession to nuclear proliferation and global climate change. The president also stressed that it was important for the US and China to be "united in preventing Iran from acquiring a nuclear weapon, and urging the Islamic Republic to live up to its international obligations." On 2009 September 15, China said it does not think its trade disputes with the US will hurt ties between the two countries, playing down the threat of a trade war. The US imposed tariffs on Chinese tyre imports on 10 Sept. China then requested talks, under WTO rules, over the issue. China has called America's move on tyres "protectionist". Under WTO rules, Beijing and Washington will try to solve the dispute over the next 60 days through negotiations. If that fails, China can ask for a WTO panel to make a ruling on tyre imports.

It Pakistan was instrumental in bring USA and China together more on economic and military fronts, less on political, during the Cold war era. Trade remains central to the bilateral ties making Beijing shift its economic policies towards capitalism.  The US has been concerned that China is saving too much as the global economic downturn has prompted a decrease in consumer consumption. China has pressed the US on its skyrocketing budget deficit, driven in part by Obama's massive spending to jump-start the economy. The US trade deficit with China totalled $103bn (�63bn) in the first half of 2009, down 13% from the same period last year. Washington's deficit is expected to reach $1.8 trillion this year.

Statistics indicate that China's Communist leadership has a poor record on allowing public dissent and has harshly put down protests among the country's various ethnic and religious minorities. Obama also pointed out to some ongoing differences between the two countries, in particular on human rights. Obama said he strongly believes that the religion and culture of all peoples must be respected and protected, and that all people should be free to speak their minds. And that includes ethnic and religious minorities in China, as surely as it includes minorities within the United States.�

During a meeting with Chinese officials in Washington in July, US President Barack Obama said he was hopeful for the outcome of discussions between the two countries that could lay the groundwork for a new relationship that "will shape the 21st century." Obama has urged China to begin boosting domestic demand and begin shifting from a dependence on exports, in order to help put the global economy on a more "solid foundation".

In spite of indirect cooperation between them in ant-Islamic wars, relations between USA and China, the veto members of the discredited UNSC, are thawing. Both are annoyed with each other's own hidden agendas, while Russia plays its own brand politics with both. Obama said the US remained committed to "bilateral and multilateral coordination" on economic issues and said both countries must continue collaboration to denuclearize the Korean peninsula. China could push for US to make a priority of curbing inflation. The crux of the issue is lack of trust in China�s relations with USA. Both countries must try to build better relations despite their very different social systems, cultures and histories. Both sides insist on seeking reassurances over accusations of trade protectionism, climate change and clean energy, etc. Top officials from both countries, however, have called the bilateral relationship crucial to solving many of the world's crises.

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Dr. Abdul Ruff Colachal

Specialist on State Terrorism

Independent Researcher in International Affairs, The only Indian to have gone through entire India, a fraud and terror nation in South Asia.