Confronting the Chinese Conundrum
- From: cnw <cnw@xxxxxxx>
- Date: Thu, 31 Aug 2006 10:44:50 +0800
At Large
Confronting the Chinese Conundrum
By Doug Bandow
Published 8/29/2006 12:07:29 AM
With the collapse of the Doha round of trade negotiations late month, additional
economic liberalization may come to depend more on bilateral and regional free
trade agreements (FTAs). Already about 300 such accords are in operation around
the world; they could play an even greater role in the future.
FTAs also provide geopolitical benefits. In particular, they give Washington a
means to strengthen bilateral ties with other states at a time of increasing
international challenge. As political relations fray even with some long-time
friends, the prospect of financial gain remains a strong inducement for allies
to maintain close ties with the U.S.
Employing creative tactics to enhance American influence is particularly
important in Asia, where China's rise is transforming the region.
Although many Chinese remain desperately poor and economists disagree over the
most accurate statistics representing the Chinese economy, the People's Republic
of China now possesses one of the top four economies on earth. The PRC's rapid
growth has spawned growing Chinese investment and especially trade in Asia and
around the world.
At the same time, Beijing is asserting itself diplomatically and substantially
augmenting its military. China is still far from achieving superpower status,
but is fast becoming a significant regional power.
As a result, PRC influence is increasing even in nations long friendly to the
U.S. Political tensions between Tokyo and Beijing cannot obscure their growing
economic relationship; Australia is cultivating friendly political ties while
profiting from expanding economic opportunities with the PRC. South Korea, a
U.S. ally for more than 50 years, now trades more with China than with America;
more South Koreans look favorably on the PRC than on America.
Economic ties also are increasing between China and Taiwan even at a time when
the latter attempts to forge a separate political and cultural identity. Indeed,
roughly four percent of Taiwanese live in the PRC, primarily for business
reasons. PRC officials hope and independence-minded Taiwanese fear that the
prospect of economic gain or loss may cause Taipei to compromise on its
territorial integrity.
China's evident rise has caused some Americans to see China not only as a
diplomatic and economic competitor, but as a dangerous military adversary as
well. They believe war is likely and direct confrontation is the only way to
preserve U.S. influence in East Asia.
War obviously is in no one's interest, especially between nuclear-armed powers.
But the future of Beijing and the region is not fixed. U.S. policy can change
the future.
AMERICA RISKS PLAYING A LOSING HAND if it bets U.S. simplicity against Chinese
subtlety, however. Both Canberra and Seoul, for instance, have indicated a
distinct lack of enthusiasm for any U.S. plan to "contain" the PRC.
A more nationalistic Japan seems more inclined to back America, but such resolve
might not survive an actual confrontation. Taiwan, too, prefers smooth relations
between Washington and China. Even a short-term U.S. victory in any conflict
likely would leave Taipei at a long-term disadvantage.
Under these circumstances, Washington should look for additional cards to play.
The most important benefit of American friendship today may be access to the
U.S. economy. America retains the largest, most productive, and most advanced
economy on earth. Any Asian country would benefit from linking up with the U.S.
Playing the trade card seems most important in cases where Beijing's attraction
is strongest, such as South Korea. Not only has China replaced the U.S. as the
Republic of Korea's leading trading partner, but, as noted earlier, younger
South Koreans have begun to turn away from America to China and even North
Korea. Sharp disagreement over policy towards the North has soured official
relations as well.
But Seoul and Washington are negotiating an FTA. It is the one area where ROK
officials seem enthusiastic towards the U.S.
Taiwan may be even more important. It is America's eighth biggest trading
partner (and America is third on Taiwan's list), with two-way trade running
about $60 billion annually, and is a high-income consumer and high-technology
producer. Indeed, the U.S. exports more to Taiwan than to Australia, Chile, and
Singapore, all of which now enjoy FTAs. Despite increasing economic links
between Taiwan and China, the U.S. remains the largest investor in Taiwan, while
the latter is a sizable investor in America.
ESTIMATES OF THE LIKELY INCREASE in U.S. exports through an FTA run from about
15 to 30 percent. Among the U.S. industries that would most benefit from freer
trade with Taiwan are agriculture, automotive, electrical equipment, and
machinery. (The island state already is the fifth largest destination of U.S
food exports.) American services, too, would gain: potentially significant
opportunities would open in the education, financial, health,
telecommunications, and transportation sectors. Indeed, an FTA would position
U.S. enterprises to take advantage of Taiwan's ongoing transition towards a
service-oriented economy.
Improved investment procedures would encourage additional financial flows in
both directions. An FTA also would provide an opportunity to better protect
intellectual property, a significant boon to U.S. firms.
Strengthening standards in Taiwan likely would aid U.S. producers in China, the
great intellectual property (IP) cheater. Given the increasingly important role
of Taiwanese business in China, better IP protection by Taipei would serve as an
example for the PRC.
The island, with widespread economic penetration throughout Asia, would provide
an obvious base for U.S. enterprises to expand their reach. More important,
Taiwan's proximity to China and, more important, increasing economic integration
with the mainland, would yield another beneficial effect. A Taiwan-U.S. FTA
would indirectly boost American ties with the PRC, both investment and exports.
Taiwan enjoys cultural, family, and historical ties with the mainland; Taiwanese
enterprises have become major investors in China. Taipei, as an innovation
center, complements the PRC, a production center.
Moreover, since Beijing views Taiwan as part of one China, U.S. firms operating
in Taiwan and investing in Taiwanese concerns might find improved access to the
larger China market. This is likely to be of particular benefit to smaller U.S.
enterprises which do not have the wherewithal of, say, a Boeing to easily breach
the Chinese market.
OTHER, LARGER GEOPOLITICAL CONSIDERATIONS also favor an FTA. Taiwan is the great
Asian anomaly, a not-quite country that remains a potential conflict left over
from the Cold War. For nearly three decades Washington recognized the Republic
of China, rather than the People's Republic of China, as the sole legitimate
government of the mainland (plus Taiwan).
President Richard Nixon opened a dialogue with the PRC and President Jimmy
Carter switched formal ties from Taipei to Beijing. Since then Taiwan has
existed in an international twilight zone, a commercial powerhouse officially
recognized by just a couple dozen small nations. Despite a population of only 23
million, Taiwan ranks 16th in the world in terms of trade. An FTA with the U.S.
would strengthen Taiwan's position as it deals with a China determined to absorb
the island.
Most obviously, such an accord would help grow the Taiwanese economy. Although
the impact would be modest -- a study by Taipei's Chung-Hua Institution for
Economic Research predicts a two percent increase in exports and .5 percent hike
in GDP -- any boost would help Taiwan as it confronts its rapidly growing
neighbor across the Taiwan Strait.
Moreover, the Institute for International Economics suggests that such an
arrangement would further integrate Taiwan into East Asia. Enhancing Taipei's
relative economic importance and thus its political profile would increase its
neighbors' stake in regional stability.
Even long-time U.S. allies such as Australia and South Korea have no interest in
being drawn into a conflict arising from coercive Chinese action against Taipei.
The tighter Taiwan's links to surrounding nations, the higher the price everyone
would pay in any military conflict. Although neighboring countries would be no
more inclined to back Taiwan's desire for a separate identity, they would be
more likely to press the PRC to rely on peaceful, evolutionary developments to
bring Beijing and Taipei together.
A U.S.-TAIWAN FTA WOULD further demonstrate America's commitment to Asia as that
region races past Europe in importance for America's future. Washington already
has implemented free trade accords with Australia and Singapore and is
negotiating one with South Korea. Similar agreements have been proposed for
nations ranging from Indonesia and Malaysia to the Philippines and New Zealand.
An FTA with Taiwan would further demonstrate the U.S. commitment to Asia.
(Washington also should expand this approach to what remains the most important
Asian economy, Japan, though the politics on both sides of the Pacific would be
complicated.)
Unfortunately, opposition to free trade is rising in Washington, even among
Republicans. However, the benefits of moving ahead with a U.S.-Taiwan FTA are
too great to ignore. The issue is geopolitics as well as economics. Since "the
great game" with China already has begun, Washington needs to use all the tools
at its disposal to enhance its regional influence. That includes freer trade
with America.
Doug Bandow is Vice President of Policy for Citizen Outreach and the Bastiat
Fellow in International Economics at the Institute for Policy Innovation. He is
a former Special Assistant to President Ronald Reagan and the author and editor
of several books, including Foreign Follies: America's New Global Empire
(forthcoming, Xulon Press).
.
- Prev by Date: Chinese maker of nicotine inhalers planning IPO
- Next by Date: Chinese Heroes vs. World of Warcraft
- Previous by thread: Chinese maker of nicotine inhalers planning IPO
- Next by thread: Chinese Heroes vs. World of Warcraft
- Index(es):
Relevant Pages
|
Loading
