If the third and final instalment of the televised debate between President Obama and his Republican challenger Mitt Romney is anything to go by, it seems China will remain a huge bugbear for the Americans in the years to come. Indeed, it is basic human nature to blame someone else if things are not going well for you. Mitt Romney was particularly harsh and lacked any sense of balance when he said China was ?counterfeiting American products, hacking into our computers and stealing our intellectual property rights?. Indeed, such accusations can only be categorised as wild and sweeping in nature. Evidently, Romney was trying to play to the galleries. But such demonisation of China also shows a certain tendency, which if it develops into a belief, can create lasting damage to relations between two peoples who are otherwise so interdependent through trade and business.
There is another 60-second video clip doing the rounds as part of the anti-China rhetoric which shows a Chinese leader in 2030 walking into an auditorium to address enthusiastic students in Beijing. The leader simply narrates how the Greek, Roman and British empires fell because they abandoned the principles that made them great. America did the same after the ?Great Recession? and tried to spend its way out of a financial crisis. The clip ends with a one liner, ?Now we own much of their debt and they work for us.? There is derisive laughter from the audience. This too seems to be part of a clever Republican attempt to win some brownie points.
The larger question, of course, is whether it helps in the long run to demonise China in this manner. At some level, it only betrays the American insecurity in regard to China. Indeed, one question posed by the venerable moderator of the debate between Obama and Romney was whether China could be seen as a key national security threat.
The way the issue was posed itself betrayed a certain anxiety about China?s emerging role in world affairs. Romney also spoke about how China had used an undervalued currency to gain an unfair trade advantage. But to describe China as a computer hacker and counterfeiter of American goods was a bit over the top. The bulk of the cheap, labour-intensive Chinese goods that the American middle class has become so accustomed to buying year after year are not even being made in the US any more. The point is it just doesn?t occur to Mitt Romney that the American middle class has enjoyed the benefit of cheap goods from China all these years on money borrowed largely from China. Imagine constantly levelling all kinds of charges against your own lender who is sustaining your good life!
As for President Obama, he was certainly more nuanced when it came to commenting on China?s policy of dominating world trade. Obama said the US and China were deeply interdependent and that China did not always play by the rules of free market in global trade.
Obama set out a more positive agenda by suggesting that pressure can be put on China to play by the common rules of the market through other means. In this context, Obama asserted that the US will substantially increase its security presence in the Asia-Pacific region and deepen economic and security engagement with Asian economies, including India, as the big growth in trade and business in the coming decades will occur here. The bulk of trade in energy and other goods will happen in the Asia-Pacific region. Through this geo-economic engagement, the US hopes to put pressure on China to become more and more open in terms of playing by a common set of rules. The Chinese, in fact, have already read the writing on the wall and will have no option but to gradually shift their approach to wooing Asian neighbours rather than threatening them from time to time. Obama described the Asia Pacific region as the new pivot for the US to recover its economic fortunes and consequently keep its military dominance over a longer period.
In regard to China, Romney seemed to delve more into the past when he spoke of unfair practices like the yuan undervaluation. Obama, in contrast, was looking more at how China could be engaged through other multiple strategies.
Indeed, yuan undervaluation is now an old story. The consensus among most analysts is that the yuan is only marginally undervalued now?maybe about 5-7%?as compared to about 30% a decade ago. The surest sign of this is that China?s current account surplus has steadily fallen from 8% of GDP some years ago to about 2% now. China?s wage labour costs have also nearly doubled in the past six years or so.
Fortunately, India did not figure at all in the Obama-Romney debate, especially when Romney attacked the President for having policies that encourage outsourcing of jobs to China. The focus of the debate remained on how to get manufacturing back to the US. India really doesn?t figure in the big debate over manufacturing having been outsourced to China.
Both Obama and Romney were tying themselves in knots over how to get manufacturing back to the US. For government policy alone cannot revive manufacturing. It has to happen through bottom-up competitiveness. For instance, Romney was clearly on the defensive when Obama said his government had saved the Detroit car companies like Ford and General Motors from bankruptcy even as Republicans opposed the idea. Romney was quick to add he was from Detroit and was happy to see the car companies revive. The key question is whether the US can get back its lost decade and a half in manufacturing. The answer is probably no.
mk.venu@expressindia.com