Playing at Economic Nationalism re: Friedman
PaPaPeng
Who is playing at economic nationalism?
April 18, 2007
http://english.people.com.cn/200704/18/eng20070418_367648.html
There have been frequent trade frictions between China and the United
States recently. Against the backdrop of the "China's rise and threat"
theory, some Western scholars have questioned the country's reform and
opening up policy, labeling it "economic nationalism". Furthermore,
punitive measures continue to be taken against Chinese exports
overseas. Who, after all, is playing at "economic nationalism"?
Weaker countries should not follow liberalism blindly
Economic liberalism is the mainstay of globalization not because it
has a greater value than nationalism, but because it tends to
represent the interests of stronger countries. It has therefore become
a global policy advocated by developed countries, especially world
leaders. It is used as a tool to promote globalization, hegemony and
domestic interests. Developing countries, the weaker parties, must
protect their basic interests during the course of development and
move gradually towards economic liberalism.
In China, since Ming (1368-1644) and Qing (1644-1911) times the state
has been in control of foreign trade. However, in the 19th century,
western military might forced China to partake in free trade. At the
time the tariff was 5 percent, almost the same as the WTO standard for
developed countries today. So we could say China began engaging in
free trade 150 years ago, and that it was precisely such free trade
that led to its decline. Conversely, Britain, France, Germany, Japan
and the US were able to use their state power to protect their
national industries at an early stage of development. Britain relied
heavily on its superior navy to facilitate its rise as a world power,
and restricted silk imports to protect its domestic textile sector.
German historians vehemently opposed free trade and advocated state
protection. Japan established its banking system on war compensation,
while the US levied a tariff of over 40 percent for a long time. Only
after 1946, when 40 percent of global industrial production and 70
percent of gold reserves were in the US, did Washington turn to free
trade, which was in the US' national interest. Even so, it never
prevented the state from wielding the stick of protectionism whenever
necessary.
In the US, domestic laws are have more clout than international
treaties, and interest groups at home never cease lobbying Congress
for special protection. The US directly draws on national strength to
support its strategic industries and efforts to maintain financial
hegemony; its grasp on international markets has never slackened.
Clear evidence of this includes Alan Greenspan's diffusion of the
stock crisis in 1987, US government subsidies to Boeing, and long-term
agricultural subsidies. To maintain its market monopoly, the US
government pushed Boeing into a merger with MD so that it could
compete with Europe's Airbus, a move well outside domestic
anti-monopoly laws. The US adopted free trade as a basic concept to
both promote globalization (which is in line with US interest) and
protect the interests of financial groups at home.
It is impossible for developing countries, which are in a
disadvantaged position, to follow blindly.
Protect basic interests while opening to the outside world
As a populous developing country with a brilliant history and culture,
China's modernization process is not the same as that of Europe and
America. Their commonality is the transition from an agricultural
society to an industrial and information society, which requires
industrial primitive accumulation. The difference is that China is a
plundered nation and didn't take the West-designed false modernization
road, unlike some Latin American and south Asian countries. China
blazed its own trail and realized primitive accumulation through a
socialist planned economy. This is anti-West, but not
anti-modernization. Westernization is not the same as modernization.
In terms of carrying out the common historic task of primitive
accumulation for industrialization, China raised the
industry/agricultural ratio from 1:9 to 5:5 in three decades,
maintained an accumulation rate of over 30 percent, total production
increased 20 fold and the average life expectancy has risen from 36 to
70. We can say proudly that China has developed the fastest and most
efficiently. China relied on internal accumulation rather than outward
expansion; it did not slaughter hundreds of millions of Indians,
traffic tens of millions of Africans across the oceans or wage wars
that carved up world markets. This leaves us superior to the West both
historically and morally.
China's traditional culture is a culture of peace, and our primary
task is the subsistence and development of one fourth of the world's
population and the environment. As soon as it completed industrial
primitive accumulation, China opened to the outside world. China, in
terms of the extent to which it is open to the world, is on par with
some countries that joined the world trade system much earlier. Now,
China's economic development is in the interests of many developed
countries including the US.
There is no such thing as "neo-economic nationalism" in China, and
what some Americans fear is in fact the revitalized pride and
self-confidence of the Chinese people, which is rapidly changing the
world economic pattern. China is developing its own scientific and
technological system and defending and expressing its legitimate,
independent national interests. Some Americans, unable to adapt to
this new scenario and unwilling to recognize China's new status, have
deliberately made the disputes ideological. This is unacceptable to
the Chinese people.
Foreign-funded enterprises make huge profits in China
Many people have argued the case for China's so-called "economic
nationalism" by citing the country's huge trade surplus and the recent
cancellation of preferential income taxes for foreign-funded
enterprises in the nation. However, the undervalued yuan and policies
encouraging export and restricting import are not as big factors in
the long-term trade surplus with the US as free trade. Now, as China
shifts from an "export-oriented" strategy to a "domestic,
demand-oriented" one, imports, including those from the US, will be
gradually expanded. For its part, the US should change its "blockade"
policy and loosen restrictions on exports to China, especially
high-tech exports. This is the right way to address the trade
imbalance.
As for the cancellation of preferential taxes for foreign-funded
enterprises, it is obvious that foreign capital has hugely benefited
China. The biggest of the benefits is the added-value of cheap Chinese
land, the price of which has soared in recent years. Many
processing-trade factories consume a lot of energy and cause a lot of
pollution, but avoid paying the environmental costs. The cheap
commodities they produce have caused China to be the target of
multiple anti-dumping investigations. While accusing the Chinese
government of supporting enterprises at home, the US government
directly forced China to delay the application of domestic
technological standards to protect American businesses. In 2005, 54
transnational corporations in China petitioned for extended
preferential policies in China. All this was contrary to free trade
and WTO rules, so who, after all, is playing at economic nationalism?
The preconditions for attracting foreign funds have completely
changed. For two decades China has given a free hand to foreign
businesses, allowing them to earn money on preferential terms to build
up the country. Indeed, they have earned and will continue to earn a
lot of money, or there will be no influx of foreign capital. However,
China's national interests and security must be safeguarded and
domestic enterprises and strategic industries must now take the road
of independent innovation and development.
The author, Yang Fan, is a professor at the business school of the
China University of Political Science and Law; translated by People's
Daily Online.
fyf...@gmail.com
tks
======================
On Apr 19, 9:54 am, PaPaPeng <PaPaP...@yahoo.com> wrote:
> Who is playing at economic nationalism?
> April 18, 2007http://english.people.com.cn/200704/18/eng20070418_367648.html
fyf...@gmail.com
China? The way it is going, the US can print out as much toilet paper
as it wants and have the Chinese toil for them.
Your views?
============================
On Apr 19, 9:54 am, PaPaPeng <PaPaP...@yahoo.com> wrote:
> Who is playing at economic nationalism?
> April 18, 2007http://english.people.com.cn/200704/18/eng20070418_367648.html
ltl...@hotmail.com
> Is the link maintained between rmb and US$ a good way to safeguard
> China? The way it is going, the US can print out as much toilet paper
> as it wants and have the Chinese toil for them.
>
> Your views?
Cannot be answered without knowing to what extent the farming sector
is
subjected to international competition.
The issue is this. All developed countries subsidize their farmers
one way
or the other. The farming sector of China will not competitive without
some
government subsidy. Can China raise the value of the yuan enough to
subsidize the farming sector?
> > Daily Online.- Hide quoted text -
>
> - Show quoted text -
ltl...@hotmail.com
> Excellent article...Was this written in English first?
>
> tks
The article was written in Chinese first.
But the theme is an echo of the book by Cambridge's Chang Ha-Joon's
book, "KICKING AWAY THE LADDER."
PaPaPeng
wrote:
>Is the link maintained between rmb and US$ a good way to safeguard
>China? The way it is going, the US can print out as much toilet paper
>as it wants and have the Chinese toil for them.
>
>Your views?
The lock step link between the RMB and the USD will have to be broken
eventually. To do so in the near term will be disastrous for both
countries. In the worse case scenario China loses a bulk of its
foreign currency holdings of USD 1.2 trillion. It will hurt but to
lose one's bank account is not fatal. All the physical,
organizational and manpower assets for production are still intact and
China's trade with the rest of the world is in balance. For the US,
as large as her foreign debt is her public debt is even larger
[WIKI: The United States public debt, commonly called the national
debt, gross federal debt or U.S. government debt, is the amount of
money owed by the United States federal government to creditors who
hold U.S. Debt Instruments. As of the end of 2006, the total U.S.
public debt was $4.9 trillion. This does not include the money owed by
states, corporations, or individuals, nor does it include the money
owed to Social Security beneficiaries in the future. If
intragovernment debt obligations are included, the debt figure rises
to $8.6 trillion. In 2005 the public debt was 64.7% of GDP. According
to the CIA's World Factbook, this meant that the U.S. public debt was
the 35th largest in the world by percentage of GDP. ]
and growing by leaps and bounds. Make a web search and you will come
up wiht figures like 14 trillion by 2020 or some other unimaginable
figure. When things go downhill an avalanche results. Assets that
may be worth a lot fetch pennies on the dollar in such an event. To
get to the point no one gains when a giant like the US falls.
What shall China do? She is forming an independent state owned
investment agency along the lines of Singapore's Tamesek holdings.
Instead of holding fait money (ie pieces of pretty paper with
portraits of US presidents) this agency will spread out its assets in
the form of securities and properties. USD 1.3 trillion is still a
lot of money to reallocate. One proposal dear to me will be for
China to invest in thrid world infrastructures. If current USD
securities pay 2 percent then China can build a pwer station in a
third world country the seeks only a return of 2.5 or 3 percent. This
will hold down inflation in the recipient country, and provide them
with a critical infrastructure at an affordable price with which they
can earn money to trade with China. It is this trade that would
otherwise not exist that will be the real payback. The other sectors
that China should go big in is Banking, Insurance and Property.
Sounds familiar? Exactly. That's how trhe Jews gained so much soft
power and influence in the US, the UK and EU, in Russia and much else.
China must never let the RMB take over the role of the USD and before
that the pound sterling as the world's reserve currency. That burden
will be the ruin of any country.
PaPaPeng
>To get to the point no one gains when a giant like the US falls.
But fall she will although there won't be any disintegration of that
country. Its more like the US will lose her hyperpower status within
ten years. Its already in progress and the article below is a very
good description of the process
All options open to India
By Zorawar Daulet Singh
April 20, 2007 http://www.atimes.com/atimes/South_Asia/ID20Df02.html
The "post-post-Cold War" era has begun. In fact, it began in early
2006, by which time it was clear that the hyperpower of the 1990s,
United States, had been checked in its tracks in one of the most vital
theaters of our times, the Middle East.
The US debacle in Iraq, however, coincided with equally dramatic
developments in Eurasia. The unprecedented resurgence of Russia,
shortly after it was written off, has infused the international system
with a balance of power that can only suggest the multipolar order has
arrived. The geopolitical arbitration by Russia on the Iran issue has
been the watershed event.
As New Delhi gradually adjusts to an altered geopolitical environment,
vestiges of an earlier era of foreign policy ineluctably continue to
influence the strategic discourse. The discord and collaboration among
the Great Powers over the past year can easily be misinterpreted and
produce narrow policy choices. Thus, it is imperative to discern the
pertinent variables in today's global politics before debating
specific tactics.
A world restored
To be sure, tectonic shifts in the geoeconomic sphere over the past
decade have underpinned the structural change that is visible today.
At its core lies the well-documented economic renaissance of the Asian
region in general and the Chinese economy in particular, a process
that entailed a massive reallocation of productive capacities in favor
of these economies that in turn supply the US and European Union
primarily via China. In mid-2006, China surpassed the US as the
world's second-largest exporter (third-largest importer).
The current phase of globalization must be contrasted with previous
episodes. Unlike earlier eras where industrial structures were
vertically integrated and thus nationally concentrated, today's
system, with the exception of core strategic sectors, is characterized
by horizontally integrated transnational production value-chains. This
stems from technological innovations whereby physical and virtual
connectivity has risen steeply. But in this "flattening" trend also
lie the roots of systemic change - the relative ease and frequency of
transfer of manufacturing industries from the US and the Organization
for Economic Cooperation and Development to Asia, with China at the
epicenter. Two significant trends may be noted. First, the Western
monopoly over international capital flows has been broken. This is
underscored by the fact that Asian economies account for the bulk of
global foreign exchange reserves, a manifestation of the large trade
surpluses that these economies run with the US and EU.
There are already indications that a portion of such reserves will be
an important source of future investment flows. Second, the global
energy order has witnessed seminal reconfigurations. The national oil
companies of the Organization of Petroleum Exporting Countries and
Russia, today, account for about 85% of hydrocarbon reserves. The
cumulative surplus (2002-2007) of oil exporters is estimated at US$1.7
trillion. The structural effects of the concentration of supply and
demand patterns suggest that high hydrocarbon prices may not be a
temporary phenomenon.
Besides the obvious consequence that Western oil majors no longer
dominate energy security issues, is the geoeconomic implication of the
petrodollar (or petroeuro) economies now deploy a high portion of
their surpluses toward internal rejuvenation, consumption and foreign
direct investment (FDI) in Asia and Europe (by Russia), whereas
previously revenues were recycled primarily to the US.
Gulf oil exporters, the seventh-largest "emerging market", are now
actively promoting two-way linkages with Asia, supplying energy and
redeploying their financial wealth in return for technology,
inexpensive Chinese products, infrastructure and military hardware.
Suffice it to say, such developments have significantly reduced the
leverage of the United States and made its economic instrument
ineffective at best or self-defeating at worst, thus leaving few
alternatives to multilateral solutions.
Military power is, undeniably, the ultima ratio in international
politics, and the aforementioned geoeconomic patterns are insufficient
to make the world multipolar. The United States continues to be the
largest defense spender by far and has been relentless in its drive
for innovations in high technology.
Additionally, the partial autonomy of action of the US's alliance
partners - the EU through the North Atlantic Treaty Organization and
Japan through the 1952 security treaty - in military affairs ensures
that it has a favorable alignment externally to complement its
internal military capabilities. Indeed, the US has sought to link
these disparate bilateral military alliances into an integrated
security system.
If this were all, the system would still be unipolar. However, the
addition of Russia, a state geographically placed to influence
multiple theaters on the geopolitical chessboard, as an autonomous
actor in foreign affairs, has altered the relative power of US-led
alliances. The sophistication of Russia's military-industrial complex,
a legacy of over 60 years of research and development, and the fact
that it is the only Great Power that possesses a credible nuclear
deterrent vis-a-vis the US, ensures that the current distribution of
military power, albeit asymmetric, is enough to ensure that
unrestrained US action is no longer possible. For such is the logic of
nuclear weapons.
Indeed, American attempts at nuclear primacy (ie missile defense) are
predicated on circumventing this logic, first explicitly demonstrated
by US's unilateral exit from the Anti-Ballistic Missiles Treaty in
2001. The inadvertent result, however, is that the US-Russia nuclear
status has been perpetuated and Russian innovations in the ballistic
missile sphere will preserve its leverage in global geopolitics by its
ability to offer its nuclear umbrella.
China, though a formidable military power, has yet to indigenously
develop conventional and strategic capabilities to match the US-Russia
duopoly. Nonetheless, China's military doctrine that lays emphasis on
asymmetric acquisitions and strategies has ensured a balance of power
in the theater most vital to it - the Strait of Taiwan.
Patterns of interaction
India, it can be stated unequivocally, today faces its most propitious
environment, after almost 15 years of "unipolarity". Given a range of
options hitherto unavailable, it would be unfortunate and extremely
costly if New Delhi's external conduct was unable to exploit the
present diplomatic revolution.
Some commentary, however, continues to be predicated on the operations
of a system that no longer prevails. Such confusion partially stems
from the complexities of current interactions, which if interpreted in
narrow terms may indeed lead to fallacious assumptions and
consequently influence the conduct of Indian foreign policy.
An example may be instructive. Strategic coordination between Russia
and China as it manifested itself in the Iran issue, while not an
irrelevant development, led to predictions of new blocs emerging to
contain the US, with the corollary that India would need to choose
between the US and its allies or Russia-China. The emergence of
multilateral "blocs" such as the Russia-China-India trilateral format
and the Shanghai Cooperation Organization (SCO) have lent currency to
such views.
This is a false choice. While Russia and China have enunciated their
desire to coordinate their actions on several issues, first expressed
in their strategic partnership agreement of 2001, and have done so
subsequently, they have simultaneously sought to deepen their
interaction with the actors they seek to balance.
This stems from the geoeconomic patterns that were alluded to earlier.
Today, China is a $1 trillion exporter (37% of gross domestic product)
that is heavily immersed into the system, and in 2008 will become the
world's biggest exporter. The economic realism underlying Russia's
energy strategy in particular and the expansion of its natural
resource complex in general implies it, too, is seeking to integrate
into global economic processes. In sum, neither state is seeking to
cultivate exclusive partnerships.
Multilateral endeavors, manifested in the trilateral format and the
SCO, are but pragmatic attempts at collective diplomacy to manage
regional interaction in a common geopolitical space and perhaps more
importantly to exploit geoeconomic opportunities: given the dearth of
effective pan-Asian institutions, hardly an unwelcome development.
To appreciate this phenomenon it is vital to distinguish today's
multipolar system with its bipolar predecessor. One of the most
important variables that differentiates the current plural order with
the bipolar era is that in the latter, each bloc was almost entirely
self-sufficient, with minimal economic interdependence.
Indeed, economic interdependence between the superpower blocs was so
peripheral that it led Kenneth Waltz, the dean of contemporary realist
thought, to dismiss the trend altogether. Of course, military
interdependence between the US and Soviet Union was vital, and from
that stemmed the strategic stability witnessed through the Cold War.
Today, however, the erstwhile "blocs" are much more engaged at an
economic and thus political level. This is not to suggest that
geoeconomic competition has ceased and that states will pursue an
international division of labor over relative national gains. For that
would be suicidal. But certainly the zero-sum premise has been
tempered where opportunities for mutual benefit exist. US-China
relations epitomize this phenomenon: the mutual dependence of the US
economy whereby it is the largest importer from China, which in turn
finances a major portion of the huge US current-account deficit. Note
that the relationship has transformed from the asymmetry that existed
in the 1990s when China was highly dependent on American markets and
investment, toward the "common vulnerability" that currently prevails.
Energy linkages between Russia-EU - originally with and via Germany,
but now extended to an array of direct bilateral gas deals between
Gazprom and EU members, ranging across Ukraine to Portugal - is
another example of mutual dependence. This is since supply security
for the EU is as vital as the demand security for Russian
hydrocarbons, especially gas, where buyers-sellers are entwined by
rigid delivery infrastructure (ie pipelines).
The implication is that traditional alliance-based relationships are
being affected and states are adopting a relatively multidimensional
foreign policy. Of course, states that are already integrated within
US-led alliances are finding it relatively harder to chart an
autonomous course, given their overwhelming military dependence on the
US - especially the EU and Japan. Yet, even for such states or
groupings there is unlikely to be an inevitable consensus with the
alliance leader. Russian Foreign Minister Sergei Lavrov has expressed
it succinctly: "Any attempts to restore the bygone trans-Atlantic
unity as an isolated aspect of international life can have only
partial success."
For New Delhi, the implications of the current patterns of interaction
must be clear. Bluntly put, neither Beijing nor Washington will
sacrifice their bilateral relationship over India, despite US efforts
to cultivate India as a potential alliance partner. This, arguably,
has more to do with enhancing US leverage on India rather than solely
containing China. Similarly, in China-Japan relations, the bilateral
economic interaction is too high for Japan to seek exclusive relations
with India. Thus, exploiting the interstices in today's balance of
power requires far more sophistication than in the bipolar world,
where neither bloc had economic leverage on the other.
Even Russia, which is economically the most self-sufficient actor in
the system, an autonomy that stems from its possession of every major
natural resource in its frontiers, would be unwilling to forgo its
privileged nuclear duopoly with the US. And given the dual-use of the
atom, it would thus be unwilling to unilaterally overturn the nuclear
Non-Proliferation Treaty (NPT) order, as Iran has discovered. However,
considering the US has already accepted India as a unique case in the
NPT, there is no good reason to assume that Russia will not follow
suit.
Finally, it can be opined that the global architecture of
international relations, constructed in the aftermath of World War II,
and perhaps illegitimate to some, still retains a measure of
durability.
Two reasons can be put forward: first, the US, Russia and China as
joint managers of the international system are, in the final analysis,
status-quo powers that can advance their foreign-policy objectives
(including balancing the US or each other) within prevailing
institutional arrangements. This despite the redistribution of
comprehensive power in favor of the latter two.
A balanced US would prefer bargaining in the United Nations Security
Council to the alternative - "multipolar chaos", a system without
rules. Similarly, the incentive for Russia and China to rewrite rules
would be limited. What is likely to evolve is that the US
unilateralism of the 1990s will be replaced by multilateral bargaining
on major international issues.
Second, since the advent of the nuclear age, diplomacy among the Great
Powers has occurred against the backdrop of the unprecedented
destructive power of contemporary military technology, which is
perhaps the strongest argument for peaceful systemic change going
forward. Suffice it to say, the overlapping bilateral linkages that
involve all the major centers of power imply that a "friend" or "foe"
choice for India can no longer be pursued without high costs. Rather,
India must adopt a multi-vector philosophy - a multi-dimensional
principle will facilitate greater maneuvering space within the dynamic
web of international alignments, and enable New Delhi to wholly
exploit the geoeconomic and geopolitical options that may become
available at any given moment.
One can classify such a foreign policy as "neutral", "independent",
"autonomous" or even a contemporary "active non-alignment" purged of
its ideological baggage.
Zorawar Daulet Singh, who holds a master's degree in international
relations from the School of Advanced International Studies, Johns
Hopkins University, is an international relations and
strategic-affairs analyst based in New Delhi
zorawar.d...@gmail.com