Dear 44: Pragmatic commercial engagement

China’s rising political and economic influence in East Asia and on the global stage creates both challenges and opportunities for the United States. In this period of profound, global change, caused, in part, by China’s rapid development, our next president will face mounting pressure to take actions that could harm our bilateral relationship and damage our economic national interests. That would be the wrong approach. Increasing engagement with China over the past 15 years has yielded important benefits for our country, and the economic futures of both countries are now tied together more then ever before.

Since China's entry into the WTO in 2001, U.S. exports have grown almost 250 percent, more than double the rate of our next most rapidly growing export market over the same period. Such export growth has not been limited to a select few industries or to a specific geographic region, as is widely believed. For Michigan and Ohio, China is now their third largest export market behind Canada and Mexico, with both states exporting well more than $1 billion worth of goods to China in 2007. Such impressive growth has turned China into one of the United States’ most commercially significant export markets.

However challenges exist. Exchange rate concerns, intellectual property theft, the growing use of industrial policies that disadvantage foreign companies, and product safety fears continue to cause bilateral tensions, and, in some cases, adversely impact U.S. businesses, workers, and consumers. The next president should publicly recognize the challenges in our bilateral relationship while speaking forcefully in favor of ways to expand our commercial ties. Opportunities exist in many areas – services, agricultural, environmental, and energy, among others.

With that in mind, the following are three specific policy recommendations to help boost the economic, political, and public consensus surrounding the United States’ relationship with China.

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Preserve and Enhance the U.S.-China Strategic Economic Dialogue (SED)

The U.S. China SED has served as the essential mechanism for managing the economic and commercial relationship, on a long-term strategic basis as well as for work on near-term agreements that can build confidence on both sides. While the SED can and should be improved, the next president should continue it. While not yielding dramatic breakthroughs, the SED has led to important accomplishments that, over time, could prove invaluable, including the creation of the Ten-Year Energy and Environment Cooperation Framework.

Identify, Prioritize, and Press Economic and Commercial Issues Critical to Competitiveness

The next president must act quickly to respond to specific Chinese industrial policies that are impacting, or may impact, the economic competitiveness of U.S. workers, farmers, and businesses. He should continue to build upon efforts to address unfair Chinese trade and investment practices and expand entry for American businesses into China’s market based on the fundamental principles of equal market access and evenhanded treatment, regardless of national origin. The development and execution of strategies to achieve positive outcomes on priority policy concerns should be closely coordinated by the White House and rooted in a thoughtful and comprehensive assessment of our national economic interests.

China should be encouraged, through dialogue and bilateral tools, to eliminate or substantially remove unfair trade impediments. Where these tools fail to address unfair trade practices, resorting to trade actions, done in a manner consistent with WTO principles and laws, is justified. It must be made clear that we will hold, as appropriate, China accountable for abiding by its international trade obligations through proactive but judicious use of U.S. trade laws and of the WTO’s multilateral dispute settlement process.

Bolster Strategic Dialogue with the U.S. Congress on China

Equally important, the next president should enlist Members of Congress as stakeholders in the U.S.-China economic and commercial relationship. Reps. Mark Kirk (R-Ill.) and Rick Larsen (D-Wash.), co-founders of the House Joint Working Group on China, introduced with Steve Israel (D-N.Y.) and Susan Davis (D-Calif.), a package of four bills entitled the “U.S.-China Competitiveness Agenda of 2007.” The incoming administration should work with these members to improve and pass their legislation early in the next Congress, in particular, expanding resources for export promotion, with a focus on small and medium-size enterprises (SMEs).

In conclusion, as the relationship between the United States and China grows in complexity and significance, the foundation of this relationship remains our economic and commercial ties. American consumers have benefited from China’s low-cost products; and American manufacturers and agricultural producers from China’s growing market. Yet a perception persists in our country that we are increasingly losing jobs and markets to China as a result of that country’s unfair trading practices and nationalistic policies. The next president should attack the root of isolationist fears in our country while recognizing that our strategic interests lie in forging an even stronger bilateral economic and commercial relationship dosed in pragmatic realism.

Myron Brilliant is vice president, Asia, at the U.S. Chamber of Commerce. Jeremie Waterman, senior director, Greater China for the U.S. Chamber, co-authored this piece.

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