Obama's soft power may be hard for Beijing to swallow

PUBLISHED : Thursday, 22 January, 2009, 12:00am
UPDATED : Thursday, 22 January, 2009, 12:00am

Mainland television viewers eager to tune into United States President Barack Obama's inauguration speech didn't quite get the full picture. When Mr Obama praised earlier generations of Americans who 'faced down fascism and communism', state-controlled China Central Television cut away to the studio.

Similarly, the president's remarks about 'those who cling to power through corruption and deceit and the silencing of dissent' were omitted from transcripts of the speech published on prominent mainland websites.

Yet while the rest of the world snickered at the comic insecurity of Beijing officialdom, it is likely that many who laughed failed to appreciate the real joke. The mainland's censors got it wrong: it wasn't Mr Obama's comments about communism or tyrannical rulers that threaten to make life difficult for the communist party, but his hint that his administration stands ready to circumscribe the unfettered operation of free markets.

To be fair, the hint was a subtle one. All Mr Obama said was that 'without a watchful eye, the market can spin out of control', and at the time he was talking about the US financial crisis, not relations with China. Even so, the implications for China's economy could be heavy.

During his election campaign, Mr Obama repeatedly criticised US companies for shifting their manufacturing to cheaper jurisdictions offshore, talking about laid-off US factory workers forced to watch helplessly as their old assembly lines are 'unbolted and shipped off to China'.

At the time, many seasoned observers dismissed this as empty electioneering. But Mr Obama has not changed his tune since his November victory. On Monday, just one day before his inauguration, he again vowed to protect American jobs from being shipped overseas.

Despite these pledges, Mr Obama is not going to try and defend US manufacturing jobs by slapping blanket tariffs on Chinese imports. That would only initiate a destructive trade war that would benefit no one.

What he may do, however, is call for goods imported to the US to meet basic labour and environmental standards.

Such requirements could impose a heavy burden on producers in China, rendering US manufacturers more competitive. A 2004 study for the US Bureau of Labour Statistics found that the average cost of employing a manufacturing worker in China was just 3 per cent of the cost in the US (see the first chart below). Even allowing for the steep rise in mainland wages since then and the differential in purchasing power, today it would still cost roughly eight times more to employ an American than a Chinese worker.

Similarly, a 2006 study by the University of California-Irvine found US industrial companies typically spend 10 times more of their revenues on environmental compliance than their Chinese counterparts (see the second chart).

Restricting free trade by tightening labour and environmental standards on imports would be popular in the US. What the mainland's leaders haven't bargained for, however, is that could just prove popular in China, too.

Mr Obama is a consummate campaigner. In the run-up to his election, he employed a dazzling array of techniques that harnessed the social networking capabilities of the internet to mobilise grass-roots support. With Mr Obama now in office, those same techniques are about to be deployed in support of US foreign policy in an innovative exercise in the use of soft power.

The most obvious arena for this type of public diplomacy is in the Middle East. But there is no reason why similar techniques should not be used in support of US trade policy in Asia, with Washington using the internet to bypass foreign governments in an attempt directly to persuade Asian populations that tighter labour and environmental standards are in their own interest.

No doubt Beijing would try to counter any such move. But given the highly diffuse nature of social networking and its proven effectiveness, blocking a campaign could prove a lot harder than censoring Mr Obama's inauguration speech.