By John E. Carey
Peace and Freedom
Updated July 26, 2007
On July 25, 2007, the International Monetary Fund released its 2007 projections. Those numbers indicate that China, this year for the first time, has dislodged the United States from its long reign as the main engine of global economic growth, with its more than 11 percent growth eclipsing sputtering U.S. growth of about 2 percent.
Faced with that information, next week the U.S. Treasury Secretary, Henry Paulson, visits China. He plans to engage in discussions on a host of topics including trade, the balance of trade, global warming and the environment, Intellectual Property Rights (copyrights, licenses and other protections), and, one would expect, the way China deals with the exports it sends our way.
A host of tainted and harmful products from lead-based paint covered toys to poisonous anti-freeze laced toothpaste has to be looming large over next week’s meetings, even if Paulson doesn’t raise the issue.
|Henry M. Paulson
Mr. Paulson must be feeing significant pressure. If he isn’t, we’ll just reiterate here the things that should give any thinking U.S. Treasury Secretary nightmares instead of a good night’s sleep as he jets his way to Beijing.
Yet Mr. Paulson is usually optimistic on China.
Where many Americans see threats posed by the Asian giant’s growing economic might, Paulson often sees opportunity.
“The fact that they’re the world’s fastest growing economy is something that some people (see) as a problem. I look at that as an opportunity that I’d like to capture,” he said, adding China was the fastest growing market for U.S.-made goods and services.
The US Congress has complained for several years about China’s undervalued currency, the lack of intellectual property protection in China, over-reliance on subsidies, and several other issues. The Treasury Secretary, in interviews and in documents has said over and over that he is committed to solving “issues of concern to the US Congress.”
One of the most troubling parts of China’s economic policy, from the point of view of the U.S. Congress, is the undervaluation of the yuan. This has been a particular political sore point with no less than three bills dealing with China’s currency policy scheduled for Congressional action this year. Many in Congress want sanctions imposed upon China for its monetary policy. Yet Mr. Paulson has, in the past, been highly effective at convincing the Congress to delay legislation that would sanction China over currency.
While in China, one might expect Mr. Paulson to lay out the complexity of the difficulty he faces with the Congress, in the hope that China will alleviate his pain.
Global Warming and Environment
The United Nations has condemned China for the worst pollution in the world. China also produces more greenhouse gases than any other nation by far. But China is a world class polluter: many of her rivers are polluted and even much of the ground water is no longer safe. More than 70 percent of the waterways and 90 percent of the underground water is polluted, Chinese experts say. Almost nowhere in the world is global warming more apparent: and Secretary Paulson will start his discussions with his Chinese hosts at Qinghai Lake.For a millennia this saltwater lake has been the home to some of China’s most beautiful birds. Black-necked cranes, Siberian swans and black cormorants are among 189 species that spend part of each year here hunting and building nests near the homes of Tibetan families.
But Chinese scientists believe global warming is to blame for a steep decline in the bird populations and types.
“Global warming has become a reality here,” said Chen Dongmei, director of the World Wildlife Fund’s climate change and energy program in China. “Everyone can feel that there has been a change in Beijing’s attitude toward climate change over the past few years.”
Secretary Paulson fully understands this issue. “The only way to make progress on climate change is to engage all the large economies, developed and developing, to work toward embracing cleaner technology and reducing emissions,” Paulson said in a statement. “What’s happening with the environment in the middle of China not only affects the local climate and economy but also the global climate and economy.”
Though Beijing has imposed rigid pollution and greenhouse gas emission limits local governments are continuing to invest in dirty, resource-intense industries, jeopardizing Beijing’s goals of saving energy and cutting pollution.
On Monday, July 23, , the China Daily newspaper reported that some regions are encouraging steel, cement and other heavy industries to boost economic growth despite demands from Beijing to rein in those sectors. The central government in Beijing is being ignored.
“The central government is committed to achieving the (green) targets but some local governments have turned a blind eye to them,” said He Bingguang, a deputy director with the National Development and Reform Commission.
This is a dilemma Secretary Paulson will share with his number one host, President Hu Jintao. Both men should be uncomfortable with this tar baby: a problem seemingly too large to solve.
Intellectual Property Rights
This has been a stumbling point between the two nations for a long time. American writers, film makers, computer software engineers and a host of others involved in the creative process of producing “intellectual property” expect that patents, copyrights, licenses, and other protections will ensure their work is not copied or stolen without proper reimbursement.
Chinese “entrepreneurs” do not believe in these copyright laws and freely copy just about everything for resale on the street.
China accounted for about 80 percent of the 14,775 shipments of counterfeit goods seized at U.S. ports last year, said W. Ralph Basham, commissioner of U.S. Customs and Border Protection.
I can remember buying pirated (illegally copied) expensive books in China in the 1970s. Books like the famous Oxford English Dictionary (OED), a tome that would cost hundreds of dollars in London, sold for just a few measly bucks in China. As I student I wanted reference books (this was before the internet, kids) and there was no place where reference books were less expensive than China. That was because the Chinese cared nothing for copyright laws or other such niceties.
Today, the U.S. is still deadlocked with China in bitter negotiations over Intellectual Property Rights.
Secretary Paulson will have his work cut out for him also because China feels defensive right now. The product safety scandal, which featured everything from tainted toys to tainted seafood, sent an alarm bell through China’s leadership. Just yesterday, the European Commission said, in so many words, that China’s promises to take corrective action haven’t resulted in the action Europe expected. And in Panama, lawmakers believe poisoned Chinese cough syrup killed more than 100 people.
International experts caution that there will be no arm twisting of the Beijing government by outsiders; especially on human rights and what Beijing considers “internal policy matters.”
Han Dongfang, the Hong Kong-based labor rights activist for the China Labour Bulletin organization, which monitors workers’ rights in China, insists “It’s about markets and it’s about cheap labor … Labor rights have become worse over the past few years.”
“The Chinese leadership does not care about international pressure. It is not China who is knocking at the door of the international community looking for favors — it is the other way around,” Han says.
Every indication is that this will be at least a somewhat tense meeting between Mr. Paulson and his Chinese hosts. Both sides will share the tension.
A Treasury Department insider told Peace and Freedom: “This is a tough diplomatic mission. But Secretary Paulson is a big boy and well versed in the issues. He’ll be successful and he’ll sleep.”
We’ll know if that is true, in part, at the end of next week.
China powering world economy
We documented many of the issues between the U.S. and China here:
China Planning a Surreal Facade for Summer Olympic Games: Beijing 2008
China and the U.S. are cooperating on IPRs but the going has not always proven as fruitful as these stories indicate:
China, FBI make $500M software piracy bust
China fails to deliver on product safety: European watchdog
China’s Counterfeiting Legacy
(By Les Lothringer in ShangHai)
China says pirated DVD production lines smuggled in
Human rights questions remain for China
From July 27:
Senate Panel Indicates Readiness to “Squeeze China” Over Currency