Thursday, September 22, 2005

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Hey, Beijing -- wanna be a stakeholder?

This evening, Deputy Secretary of State Robert Zoellick gave a speech outlining what the U.S. would like to see from China:

For the United States and the world, the essential question is – how will China use its influence?

To answer that question, it is time to take our policy beyond opening doors to China’s membership into the international system: We need to urge China to become a responsible stakeholder in that system....

There is a cauldron of anxiety about China.

The U.S. business community, which in the 1990s saw China as a land of opportunity, now has a more mixed assessment. Smaller companies worry about Chinese competition, rampant piracy, counterfeiting, and currency manipulation. Even larger U.S. businesses – once the backbone of support for economic engagement – are concerned that mercantilist Chinese policies will try to direct controlled markets instead of opening competitive markets. American workers wonder if they can compete.

China needs to recognize how its actions are perceived by others. China’s involvement with troublesome states indicates at best a blindness to consequences and at worst something more ominous. China’s actions – combined with a lack of transparency – can create risks. Uncertainties about how China will use its power will lead the United States – and others as well – to hedge relations with China. Many countries hope China will pursue a "Peaceful Rise," but none will bet their future on it....

China has gained much from its membership in an open, rules-based international economic system, and the U.S. market is particularly important for China’s development strategy. Many gain from this trade, including millions of U.S. farmers and workers who produce the commodities, components, and capital goods that China is so voraciously consuming.

But no other country – certainly not those of the European Union or Japan – would accept a $162 billion bilateral trade deficit, contributing to a $665 billion global current account deficit. China – and others that sell to China – cannot take its access to the U.S. market for granted. Protectionist pressures are growing.

China has been more open than many developing countries, but there are increasing signs of mercantilism, with policies that seek to direct markets rather than opening them. The United States will not be able to sustain an open international economic system – or domestic U.S. support for such a system – without greater cooperation from China, as a stakeholder that shares responsibility on international economic issues....

All nations conduct diplomacy to promote their national interests. Responsible stakeholders go further: They recognize that the international system sustains their peaceful prosperity, so they work to sustain that system. In its foreign policy, China has many opportunities to be a responsible stakeholder.

Read the whole thing to see what the U.S. wants China to do.

I'll be very curious to see how the Chinese react to this speech -- it's pretty blunt about China's need to change its foreign economic policy in order to avoid a protectionist backlash in the U.S. Blaming this on Chinese mercantilism is a deft maneuver that happens to be partially true.

UPDATE: On the other hand, Sam Crane thinks Zoellick's speech was not terribly Confucian.

posted by Dan on 09.22.05 at 01:25 AM


I think the U.S. has a better chance changing the course of the hurricane bearing down on it than changing the course of China.

Lecturing the Chinese about their poor while poverty grows in the U.S. is a bad joke. Asking China to join hands with us to march into a bright future as we unilaterally lay waste to countries around the globe, including one on China's border, will surely sway their Taiwan policy...

posted by: monkyboy on 09.22.05 at 01:25 AM [permalink]

It's interesting on a number of levels that Zoellick should be the one to make this statement.

The statement itself deserves further thought. Regular readers will not be surprised to know I think it a mistake to expect the Chinese or any foreign audience to react to this statement as if they were Americans opposed to (or, for that matter, supportive of) every aspect of the Bush administration's foreign and domestic policies. As the first comment on this thread suggests, that is precisely what some Americans do expect

posted by: Zathras on 09.22.05 at 01:25 AM [permalink]

When you hold a minimum of 1/4 trillion DOLLARS of American debt you are a stakeholder to the tune of in for a penny, in for a pound. The question I think you want to ask is how can the PRC be a responsible shareholder. To understand this look at what is happening at either TWX or GM. A shareholder has accumulated approximately 10% of each company, has asked for a seat on the board, management changes and operational changes. GM's and TWX's managements are trying to make changes that makes the 10%er's happy and leave management alone.

To me the PRC does not want to be a responsible super shareholder. I think their actions(piracy of trademarks and processes) is to put it in our face. They are embarked on a policy of reenacting our Europes China Policy from the Opium Wars to 1905. Our actions of protecting overselves is likely to look like the Boxer Rebellion but given our desire to make money will end in the same failure.

posted by: Robert M on 09.22.05 at 01:25 AM [permalink]

I was just pointing out the hypocrisy in the speech, Zathras. I don't expect China to care one way or the other what America does politically. China has already "won" the economic battle. You can either pretend that America still matter economically, like the speech giver, or you can just accept it.

Chinese workers saved $1.5 trillion out of their modest wages last year, Americans saved zero dollars. Chinese banks are cramming this huge sum into every available asset they can get their hands on. I'm sure they consider American treasury bonds junk bonds, but there are only so many assets available to buy worldwide.

posted by: monkyboy on 09.22.05 at 01:25 AM [permalink]

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