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Partners in peace

Flash back to 1989. Japan's trade surplus with the United States is about US$50 billion. US officials rail at Japanese structural impediments, and some US congressmen take more direct methods, smashing Japanese-made goods.

Well might one argue that Japan's closed economy and aggressive financial conglomerates justified the paranoia. Even so, when US trade representative Robert Zoellick, visiting Beijing last week, described China's US$100 billion surplus with the US as a win-win situation, it seemed to go beyond requirements of mere diplomatic tact.

During Mr Zoellick's visit, China took the extraordinary step of agreeing to support a US proposal for World Trade Organisation members to cut agricultural tariffs, something Japan has never conceded through 51 years of its post-World War II alliance with the US. Cynics might argue the US is soft-peddling in trade concerns in return for China's co-operation on Iraq and North Korea, and that US protectionists will not remain mute for long. Only a year ago President George W. Bush imposed stiff tariffs on steel imported from China and other countries.

With the US trade deficit hitting a record US$435 billion in 2002, not everyone is as optimistic as Mr Zoellick. In Washington last Friday, the National Association of Manufacturers claimed that a 45 per cent increase in machinery imports from China is 'decimating' small US companies.

But for various reasons trade is bringing the two superpowers closer together. China is now the third largest exporter to the US, after Canada and Mexico, and ahead of Japan. Like Canada and Mexico, China has served as a welcome platform for US and multinational manufacturers. Chinese-made goods may stock chain stores across the US, but they are largely under US labels, and the products themselves are in areas that provide little threat to American jobs, except in the highly protected textiles sector.

When Chinese manufacturers do enter global markets under their own brand names, as they inevitably will, they will be competing against global manufacturers based in China who enjoy similar cost advantages.

What should provide most comfort as the Chinese and US economies grow closer together, is that confrontation is taking second place to global concerns. Especially now, with war clouds gathering over the Middle East and North Korea, an open line of communication between the two giants is crucial. China may hold the key to brokering peace on the Korean peninsula, and even with more distant Iraq, China may have a role to play in restraining US unilateralism.

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