- The Washington Times - Wednesday, June 6, 2001

When President George W. Bush announced May 29 that he would renew Chinas privilege of Permanent Normal Trade Relations (PNTR), what the rest of the world calls Most Favored Nation status, he called trade "a force for stability in Asia." He had cited this theme before. Earlier in the month, he had written to officials of the Asian Development Bank, "I give you my personal pledge that the U.S. market will remain open so that we can continue to contribute to Asian Pacific prosperity." This is the same pledge Bill Clinton made when Asia was rocked by the 1997 financial crisis.
America already had a merchandise trade deficit with Asia of $168 billion in 2000, a figure that had grown by $73 billion since 1997. So what more can the United States do? One thing: it can be more selective as to whom it helps in Asia by integrating its economic policies with its geopolitical alliances.
The Asian export-led economies are all direct competitors in a U.S. market that cannot support them all. Singapores Senior Minister Lee Kuan Yew warned in February that Chinas growing trade "dominance" could put its neighbors out of business. A recent cover story on China in Business Week reported: "China is fast becoming a manufacturing threat to many Asian countries." And a new study being prepared by Japans Ministry of Economy, Trade and Industry (METI) worries that China is becoming "the world production center."
For a White House concerned with China as a "strategic competitor" this cannot be a good trend. Yet, Mr. Bush seems unable to connect the dots between economic gains and national strength what Beijing calls "comprehensive national power."
The Bush team needs to understand that in commerce as well as in arms, China is in a struggle with Americas traditional allies in Asia. The contest is for export markets and capital investment. China and the Pacific Rim countries are all trying to advance up the ladder of more value-added export goods with higher technology, and to attract the money needed for economic growth and improved living standards.
During the Clinton years, China more than doubled its share of the U.S. market, mainly at the expense of its Pacific Rim rivals. This performance was based in part on its 1994 devaluation, which helped bring on the 1997 crisis that weakened the Pacific Rim states. Beijing is attracting not only American and European capital that might have gone to develop Pacific Rim economies, but capital from businessmen in Japan, Singapore, South Korea and Taiwan. This further shifts the balance of power in the region. How China will play on these trends at the Asian Pacific Economic Cooperation (APEC) ministerial meeting in Beijing this week should further worry anyone concerned with Americas strategic position in Asia.
Slower growth since the 1997 crisis has had a negative impact on defense modernization efforts among many of Americas allies. Meanwhile, Chinas continued economic growth funds its military buildup as foreign investment improves its industries and infrastructure.
But Beijings beggar-thy-neighbor strategy could not have worked had Washington not continued granting China PNTR status throughout the 1990s. Only trade with allies should be considered normal; the privilege should be withheld from bellicose China.
Once Americas friends and allies regain preferential treatment in trade, capital will flow into their economies, reversing the dangerous trends of the 1990s. This will better serve American commercial interests as well, since the Pacific Rim states are much better markets for U.S. exports, taking 12 times as many American-made goods as does China.
Left unchecked, Beijing will use its economic weight to weaken American influence in the region. Beijing uses access to the Chinese market to reward or punish foreign firms and, through them, influence their home governments. China has successfully used this tactic in the United States, rallying American corporations to lobby against sanctions on China for weapons proliferation, espionage or other hostile acts.
Its not hard to imagine Beijing using this tactic in Japan or South Korea to discourage participation in a regional missile-defense system, or in pressuring Singapore to curtail the use of its ports by the U.S. Navy. The Dutch and Germans have already rejected cooperation with the Bush administration in building diesel submarines for Taiwan for fear of Chinese commercial retaliation.
The Bush administration needs to base its economic and security strategy in Asia firmly on Americas natural Pacific Rim allies. The United States has strong alliances with Japan and South Korea; long-standing defense ties with Thailand, the Philippines and Australia; a growing security relationship with Singapore and a commitment to defend Taiwan. American and regional business interests should be encouraged by Washington to give priority to democratic allies rather than to a threatening China.
Trade is best used to reinforce relationships built on shared interests and values. When it comes to commerce and diplomacy, the United States should always favor friends over rivals.

William R. Hawkins is a senior fellow for national security studies at the U.S. Business and Industry Council Education Foundation in Washington.


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