Publications Topics Archive Topics Archive 2007 Vol.37- No.8 Commentary: Helping Yourself to be Helped | Commentary: Helping Yourself to be Helped |
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By Sean King
Trade's a dirty word in Washington these days. Congress did not renew President Bush's authority to submit trade bills for a simple up-or-down vote, and free trade agreements (FTAs) with Panama and Peru are stalled. Several senators have also already announced their opposition to an FTA with South Korea. U.S. unemployment is low, but real wages have been stagnant for years and the cost of healthcare is too much for many to bear. Trade, especially with mainland China, is an easy scapegoat. But oddly enough, in Taiwan's case, the usual political rules of thumb about trade don't seem to apply. But Korea's just for starters. Most Americans see mainland China, with its trade surplus and fixed currency (the yuan), as the real trade villain. I'm no fan of China's politics, but this ire on trade is misplaced, self-defeating, and somewhat disingenuous, considering our own record on textile quotas, agriculture subsidies, steel tariffs, etc. People draw parallels between today's China and 1980s Japan. But trade-wise, the two couldn't be less alike. Because of Japan's restrictions on foreign direct investment, almost all of its export goods came out of Japanese-owned factories. China has instead positioned itself as the keystone in the global supply chain, letting foreign enterprises create much of its eastern coast industrial infrastructure for it. At the time of its economic rise, Japan was a humbled political power, and a U.S. ally. China's political relationship with the United States is up and down (frequently down over Taiwan). Americans shouldn't view China as a natural enemy. But neither is China the political and military partner that was and is Japan. There are eerie similarities, however, in our reactions to the two economies. In 1971, then U.S. President Nixon, concerned by a rising U.S. trade deficit, took the dollar off the gold standard and slapped surcharges on imports, resulting in a higher yen and fewer Japanese imports. Geo-strategic concerns aside, our neurosis over China's trading power today will one day look as silly as these past worries about Japan look now. In fact, today's trade deficit with China is, as The Economist magazine calls it, "a red herring." It merely reflects the latest evolution in Asia's ever-adapting supply chain. Any upward revaluation of the yuan would not significantly alter America's net trade deficit, as production would merely shift to third countries. China should, for its own sake, let the yuan's value be more greatly determined by market forces. This would stem excess liquidity at home, facilitate domestic investment, discourage trading in shady stocks, and help it reassert control over its own monetary policy. But Congressional threats to hit China with punitive tariffs if it does not revalue the yuan will only make it less likely to do so. Such inherently inflationary tariffs would also disproportionately hurt the lower-income Americans who most rely on cheap Chinese goods. So given America's globalization angst, there is surely no appetite for enhanced trade with Taiwan, right? Wrong! An FTA with Taiwan is probably the one FTA that Congress would embrace. Taiwan enjoys enduring, bipartisan Congressional support - a bedrock of support that is also consistently reflected in public opinion surveys. But an FTA with Taiwan is also perhaps the one FTA the Executive Branch is least likely to negotiate. Beijing would raise "holy hell," claiming an FTA with Taiwan violates our "one China" policy. That's not enough to stop Washington per se, but Administration officials won't go out of their way to alienate Beijing for an FTA that industry has never prioritized. And without direct links between Taiwan and mainland China, industry won't push for an FTA that only further walls them off from their own supply chains. Like its United Nation's referendum campaign, Taiwan's call for an FTA smacks of electoral politics. I'm not passing judgment on using ballot initiatives to drive base-voter turnout (gay marriage, anyone?), but Taiwan's continued harping on an FTA is falling on deaf ears in the Bush Administration. Taiwan's interests are better served waiting until after its own March 2008 presidential election, finding a way to normalize at least outbound trade with mainland China, and only then talking about any agreement with the United States. For now, Taiwan should instead focus on regulatory reform, easier issuance of work permits, better IPR protection, and increased infrastructure investment. This, along with direct links, might make U.S. industry actually ask for an FTA with Taiwan. Taipei should also not lose sight of the benefits to be had from the enhanced U.S. Trade and Investment Framework Agreement (TIFA) talks and from signing the Government Procurement Agreement under the World Trade Organization. Taiwan can benefit from America's currently acute unease toward less open, less friendly markets. Americans want to help Taiwan. But Taiwan has to let itself be helped, focusing less on quixotic trophy achievements, while taking tangible, concrete steps that can advance both peoples' livelihoods in real terms. |
