Dr.
John Paden Room 253; 7:20 PM
April
5, 2006
International Trade Relations
US-China
Economic Relations.
Intro
--(Self-intro; standing in for Stuart Malawer).
Focus on "US-China economic relations," with emphasis on trade
issues. My interest in the China "context;" 25 years of engaging with
China (1981-06); most recently in Dec/Jan of this year. GMU China programs
(photos).
--handouts ( NYT, Gutierrez trip to China, and Economist this week;
--also see web links, from Stuart, including
my Virginia Lawyer article;
Economist survey of China (Mar. 25th).
--format tonight: overview ,
then Q&A.
--also pass sign up sheet
around.
--Very timely topic: Madame Wu Yi, former
trade minister arrived this week, in prep for April 17th China-US
Business joint trade committee meetings; she will visit several states, and may
sign trade agreements in cotton, soy beans, electronics, poultry, and
communications. Most people know this will not affect the US-China trade
imbalance, which is structural.
--The US claims that 1) Chinese currency is
undervalued, 2) regulatory barriers persist, and 3) theft of intellectual
property is a big issue. Commerce Secretary Gutierrez left China on March 29th
and said he hoped the April 17th meetings could reach agreement on
three big issues: 1) trade deficit; 2) market access; 3) intellectual property
protection.
--The Chinese argue that the US is blocking high
value, high technology exports, and that much of the trade imbalance is created
by US companies in China exporting to the US. (The Wal-Mart phenomenon.) The
Chinese are aware that a mid-term election is coming up in the US in November,
and China bashing is increasing as a diversion from excessive US financial
borrowing, job off-shoring, and changing global trade patterns.
--The atmosphere in Washington is
getting so bad that when President Hu Jintao visits the US on April 20th,
he will not be given a state reception at the White House. (He was invited to
the Crawford ranch, but preferred instead to be the house guest of Bill Gates
in Washington state.) Pres. Hu will announce the Chinese purchase of 80 Boeing
jets. With Chinese dollar reserves of over $800 billion, and with China a major
purchaser of US debt, the challenge is how to keep US-China economic relations
on track without falling prey to protectionism or political pressures.
--Let's review the milestones and issues which have gotten us to this point.
1.
China accession to WTO : Dec. 2001 (15 years of US
negotiations; 200+ pages of US-China detailed agreements. The nature of the agreement:
sign-offs on the margins.)
2.
WTO & rule of law in
china
(review my article in Virginia Lawyer):
the Chinese legacy of "law." The "guanxi" phenomenon.
Recent build up of legal training programs. Big changes in commercial law since
WTO accession. (Reviewed 2,500
trade-related laws; repealed 830 laws; amended 325 laws.)
3.
The generational transition
in China
--2002-03 = key (Jiang Zemin to Hu Jintao): younger/
technically trained.
--But more domestically focused. Concern about
impact of reforms.
--Yet, continuity of trade policy, plus
"reforms" and "opening".
4.
The new (post 9/11) issues
of security.
--Esp. US ports--Hong Kong is # 1 megaport exporting
to US; Shanghai is #2;
--also GWOT & Cent. Asia;
--the oil industry and CNOOC.
5.
Current issues
--financial services: phase in at end of this
year. Will be a big plus for the US.
Win-Win for both sides.
--agriculture: big plus for US. Problem for
Chinese, because of agricultural
unemployment. (Chinese cut
out agriculture tax in Jan. 2006 to appease farmers.)
--textiles & apparel: ten year phase in:
1995-2005: then US panic…(negotiated
further three year phase
in.)
--US-EU WTO case vs. China: auto parts: what
are the issues? (In 2004, WTO/DSM,
1st US use
against China; taxes on semi-conductors; resolved via negotiation.)
--On March 30th,
2006, US & EU took auto parts issue to WTO/DSM. Issue; high
tariffs on foreign made auto parts. Begins 60 day
formal talks. Rob Portman (USTR) efforts. Chinese argue this prevents whole
cars being imported for parts.
--currency valuation & the (relaxed) peg:
shooting ourselves in the foot? (See
April 1st Economist article.) In July, 2005 yuan re-valued by 2.1%. Subsequently,
risen by only 1% against dollar. In April, US Treasury
may brand China a "currency manipulator." China ran $202
billion surplus with US last year. (Although overall Chinese surplus, worldwide
was $102 billion, since China is running deficit with other countries.) Note:
two-thirds of all Chinese exports come from non-Chinese firms (including US).
Economists argue that China's exchange rate policy has helped US: kept down
inflation; cheap imports; lower interest rates. China's purchase of US Treasury securities to maintain the
"peg" critical to US deficit spending, and to the stability of the
dollar.
--foreign direct investment (FDI) in China: a
nationalist backlash? (See Economist,
April 1st, 2nd article.) China wants to become more
"self-reliant." January 2006 convocation of top scientists in China, plus
Politburo, in Great Hall of the People, and incentives for
"innovation" in Chinese science & technology. Mag-lev technology
for high speed trains --(Shanghai to Beijing, and Hangzhou)--using Chinese technology (not European or Japanese.)
--real estate in China: big windfalls; issues
of rule of law, and financial services.
Foreigners can "buy" real estate-- ( 70
year leases in urban areas; 30 year leases in rural areas)--but mortgage and
inheritance rights not yet resolved. Again, will there be a nationalist
backlash? (Note: large numbers of Chinese Americans are purchasing property in
China, esp. in places like Beijing, Shanghai, Suzhou. Will there be an exodus
of retired American Chinese, esp. first generation, to China?)
--overall trade imbalance: what are the
issues? The concept of trade is expanding, and
now includes everything from bio-technology to
services. Key is use of WTO/DSM to settle specific issues.
6.
Current political situation
regarding US-China relations
--the Schumer/Graham visit to China; Gutierrez
visit.
--Pres. Hu upcoming visit to US
--Asia-Pacific related issues:
--China-Taiwan relations: seem to be better. (China
playing to KMT parties? Try
to isolate DPP
"splittists" and those supporting "independence.") (Will
Taiwan use the 2008 Olympics in Beijing to press for
independence? US pressure for "status quo.") Key= $100 billion FDI
from Taiwan to China.
--China-Japan
relations (and role of oil): tense! (Plus, legacies of the past.)
--China-Russia
relations (and role of oil): good relations!
--China-ASEAN
free trade zone? Coming up this year.
7.
The future of US-China
relations
--scenarios:
the good? the bad? the ugly? ("stakeholders" in global
economy, or
"trade wars?")
--interaction of political and economic issues:
six party talks, GWOT, trade, etc.
--USTR Feb. 2006 overall ("top to
bottom") assessment: 1) more personnel; 2)
better links to Congress; 3)
emphasize "mature" relationship.
--need to see China in global context, not
just "trade."
--But, key role of WTO/DSM on trade issues should be welcomed on
all sides!
--how to keep things on track in a global
economy: big challenge…
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8.
Q&A
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