The ultimate measure of whether the U.S. economic relationship with China is successful will be rising standards of living for a greater number of Americans as well as a greater number of Chinese.
China’s economic growth has lifted hundreds of millions of people out of deep poverty, and we should applaud that accomplishment. But as China’s stake in the world economy grows, so too does its responsibility as a steward of the global economic system that enabled such stunning growth.
First, China must do its share to correct huge global trade imbalances. As is now painfully clear, American consumers cannot continue to drive global economic growth as much as they have. China must move more quickly toward a free exchange rate between the U.S. and Chinese currencies so that American exporters can compete, creating more good jobs for American workers. The United States and other major trading nations should also encourage the International Monetary Fund to take a greater role in the surveillance of the global monetary system to reduce incentives for countries such as China to build up huge foreign exchange reserves.
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More broadly, the next president should encourage China’s leaders to continue on their current path of creating a broad and sustainable middle class. It is these new consumers who will want to buy American goods and services, and spend their tourist dollars here. To do this, China has to take on the challenges America faced in the first half of the 20th century. China has to expand social safety nets and protection programs for workers, as well as consumer protection, investor protection, and antitrust rules and regulations to help their middle class grow and prosper.
Importantly, the United States must work with China to tackle China’s billowing pollution and greenhouse gas emissions – steps that would likely boost U.S. exports of clean technology goods and services. And the two countries must also work through the International Labor Organization to close gaps in China’s implementation of decent labor standards for Chinese workers. For the ILO to be effective, the next administration will also need to increase its leadership in and funding for this key multilateral organization.
In the meantime, the new administration must do more to open China’s markets to American goods and services according to China’s obligations under the World Trade Organization. When Beijing does not play fairly, the president should initiate cases at the WTO in league with the European Union and China’s other major trading partners, replicating the successful joint U.S.-E.U. WTO complaint about unfair Chinese trading practices in auto parts.
As important as all of these steps are, the next president must also recognize that restoring American competitiveness at home is critical to success abroad. Investments in innovation, especially in green technologies, will create good jobs here. We need to empower workers with the tools they need become an even more flexible workforce, including universal health care and new jobs training programs, with a focus on the growth sectors of green jobs. We need to invest anew in education. And we need to provide more effective incentives for retirement savings to boost the U.S. savings rate. Finally, we must put the United States back on a path of fiscal responsibility. By taking all of these steps, the United States and China can build a mutually beneficial economic relationship.