Wednesday, August 22, 2007

Soiled Soybeans

I fear it has already begun. The downward spiral of tit-for-tat between China and the United States is starting to enter full swing. After product scares in the U.S. involving pet food, toothpaste, farmed fish, tires, toys, kids' jewelry, and ceramic heaters, the Chinese government has officially fired back.

Last month, after executing Zheng Xiaoyu (head of China's State FDA), Chinese officials felt they could do little more to head off the problem. The natural next move was to start pointing out shoddy merchandise coming from American shores.

According to a BBC World News article published on July 14th, the Chinese government suspended US meat imports citing, "salmonella and growth enhancers" as the primary concern.

And then again today, Chinese authorities announced that suspicious American soy beans had infiltrated their country. While it was unclear what the authorities wanted their US counterparts to do exactly (the problem was "weeds and contaminated dirt"), they have certainly taken aim at a sensitive area of U.S.-China trade relations.

From the Chinese perspective, going after the little green devils makes sense. As a Washington Post article today observed, "[soy] beans are the biggest single U.S. farm export to China, which has bought billions of dollars worth since the current market year began in September."

What effect this food-borne battle will have is unclear. But lurking behind the headlines is a certain significance:

In a masterful book entitled China: The Balance Sheet, writers from The Center for Strategic and International Studies and the Peter G. Peterson Institute for International Economics explain, succinctly and powerfully, just how significant China's rise will be to the future balance of power in the world (and what we should and should not do about it).

Basically, given China's growing weight, it is exceedingly important that we learn to cooperate going forward.

As they put it, "Four fundamental conclusions for U.S. policy emerge...First, China clearly represents both an opportunity and threat to the United States in economic and security terms.

"Second, the extent to which China becomes either an opportunity or a challenge is not predetermined but will depend greatly on the policy choices and internal dynamics of China and the United States in coming years.

"Third, while U.S. influence over China should not be overstated, U.S. policy can play a role, for good or ill, in shaping the decisions China makes about its future.

"Finally, therefore, while a responsible strategic approach toward China must include preparation of U.S. domestic , foreign, and defense policies to deter and deflect Chinese actions that are contrary to to U.S. interests, the United States has an overriding stake in pursuing a strategy that effectively integrates China into the global economic and security systems in a way that reinforces the American people's long-term security, prosperity, and peace."

In other words, if the world is going to be the kind of place we want to raise children in, we're going to have to get along with the formerly-Red giant. And with so much of our economy (and their's) depending on positive trade relations, this doesn't seem like a good place to start picking fights.

Yet last month, both Barack Obama and Hillary Clinton signed on as co-authors of an anti-China bill threatening to issue "punitive duties" if China doesn't revalue its currency.

And while this may not seem sexy at first, if we're already picking fights over the most sensitive areas of our relationship, we may be in for a very long 21st century.

As I blogged about before, the U.S. economy is in a little trouble- and it's not China's fault. We like to buy stuff- lot's of stuff. And China has been able to provide that stuff at 'Everyday Low Prices'.

So why all the animosity? It's not going to make the U.S. auto industry healthy again. That's a problem the unions and management need to take care of... not Obama/Hillary and the Chinese government.

Important disagreements will inevitably emerge in the future over things like China's backing of Sudan, freedom of the press, pollution, etc. And we need to pick our battles very carefully- on both sides- as a result.

Bickering over soybeans and toothpaste, let alone the equally-tainted "punitive duties", doesn't exactly seem like the best battle to pick.


Anonymous said...

Mr. Lewis, You made some excellent points. The age old wisdom of the Golden Rule still works, even in reverse. If you don't want it done to you, don't do it to someone else.

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