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U.S.-China alliance: beneficial to both?

In 1997, China ranked 10th in world trade. Just seven years later, in 2004, it had climbed to third place, with $1.5 trillion in sales.

In the process, it has siphoned away jobs and business from the United States and other industrialized nations and has become a formidable competitor for petroleum and other natural resources.

Even so, said Gary Locke, the country has “incredible needs” and “I believe there is much to gain through a strong U.S.-China alliance.”

The former Washington state governor and the first Chinese-American governor in the United States is a Seattle attorney specializing in China and governmental relations. His was the first U.S. law firm to establish an office in Shanghai and he has led several trade missions to China. He was a member of a panel at the recent annual conference of the Society of Business Editors and Writers at Seattle.

As the world’s most populous country modernizes and becomes more affluent, its needs will be enormous, Locke said. That includes access to U.S. computer/software technology, and if the United States restricts sales of that technology, it will only drive the Chinese to purchase from Europe or elsewhere — which “will ultimately be to the detriment of U.S. policy.

“If we want China as an ally, we need to be careful about our own policies regarding the transfer of technology.”

Despite it’s burgeoning economic and political power, China is still a land of stark contrasts.

“In Shanghai, there are modern Maglev trains, freeways all over the place, high rises, and U.S.-type suburbs. Yet, within a mile or so of the city you step back into the 1800s — no running water or toilet facilities, no telephones.”

China’s ability to crank out goods of every type with low cost labor has made it “a dynamic, driving force” in world trade, said another panelist, David Bachman, professor at the Henry M. Jackson School of International Studies at the University of Washington.

But it has no single economic model; rather, it has three different economies: (1) the foreign investment sector, which represents about 55 percent of Chinese trade; (2) the state-owned enterprise sector, which dominates many capital-intensive industries, such as steel and oil; and (3) the private sector, about one-third of the entire economy.

“The Chinese government understands very well the role of economic power in politics,” Bachman said. “I see China becoming the leading power in Asia, and in 20 to 50 years, one of the world’s superpowers.”

While the consensus is that China will eventually become a democracy, “The question is, how will it occur? The government will have to make concessions, become less authoritarian,” he said. “It has been talking about reform for five years or more, but it still hasn’t got off the ground.”

Reforms will also be needed in the way China does business with other countries, particularly in the area of intellectual property rights, said Jon Dudas, U.S. Under Secretary of Commerce for Intellectual Property and director of the U.S. Patent and Trademark Office.

“Over two-thirds of all counterfeit goods seized in the United States had their origin in China.”

Ninety percent of all software sold in China is pirated, he said. Counterfeit auto parts from China have cost the U.S. 210,000 manufacturing jobs; many counterfeit medicines are made there, constituting about 10 percent of the medicines sold worldwide — the list goes on and on.

“This raises obvious safety issues, when you have toys, appliances, medicines, power cords, and other products that don’t meet safety standards.” Organized crime is rapidly moving into the counterfeit business, Dudas said — “It’s 10 times more profitable than drugs, and the penalties are less severe.”

But, he said, China has the fastest-growing patent/trademark office in the world and is “working very closely” with the United States and other countries to resolve intellectual property issues.

While China is viewed mainly as a seller of goods on the international market, it is also a major purchaser of goods, Gary Locke pointed out.

“The market for consumer products is enormous, and as living standards increase, even more demand will be created.” Last year, he said, 190 million cellphones were sold in China, 26 million TVs, and a host of other discretionary goods. Although many are Chinese-produced for internal consumption, there are opportunities for the United States and other nations to capture sales, he noted.

Already a leading competitor for energy and natural resources, China’s petroleum demand over the next several years “will be enormous,” Locke said. “They are so hungry for fuel to move their economy forward, it will keep oil prices up, and that will have an impact on the United States. It could be very dicey for U.S. industries and consumers.”

Air/water pollution and other environmental degradation are “huge problems that could represent tremendous opportunities” for U.S. companies with expertise in energy efficiency and management of environmental problems, he said. “Professional services, such as architects and engineers, banking, etc., will be in demand.”

Products, though, are a different matter, Jon Dudas said. “The Chinese are very efficient at copying products, and many U.S. companies are fearful of entering their market because of this.” This makes it all the more important to resolve trademark and intellectual property issues between the two countries, he said.

There are “incredible opportunities” for U.S. agricultural sales to China, said Gary Locke. “Food is very important, and China is a growing market for U.S. products. Most of the wheat sold to them last year was from the United States. Several U.S. supermarket chains have an increasing presence, which provides an entré for U.S. agricultural products.”

The influence of the U.S. and other western nations “has accelerated” the democratization of China and improvements in human rights, Locke said.

“The younger, more educated Chinese want a democratic system. The more exposure the Chinese people have to the West, the more pressure there will be for freedoms of every kind. The genie is forever out of the bottle.

“This may not happen as fast as we in the West would like, but it is happening.”

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TAGS: Management
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