"The China Price" is China's Price for joining the Core
■"'The China Price': They are the three scariest words in U.S. industry," by Peter Engardio and Dexter Roberts, Business Week, 6 December 2004, p. 102.■"Does It Matter If China Catches up to the U.S.? History says it won't—if political stability allows trade to flow freely," commentary by Michael J. Mandel, Business Week, 6 December 2004, p. 122.
■"Wal-Mart's China inventory to hit US$18b this year," by Jiang Jingjing, China Business Weekly, 29 November 2004, pulled off website www.chinadaily.com.cn.
■"Chinese Premier Signs Trade Pact at Southeast Asian Summit," by Jane Perlez, New York Times, 30 November 2004, pulled off nytime.com.
■"China Hurries to Animate Its Film Industry," by Howard W. French, New York Times, 1 December 2004, p. B1.
I bought a six-pack of Tsing-Tao beer Tuesday night to drown my sorrows over the canceling of C-SPAN’s taping of my aborted brief in Norfolk, and as the guy rang me up at $8.39, I remarked, “I thought everything from China was supposed to be really cheap!”
Well, almost everything.
“The China price” is a truly revolutionary phenomenon in global economics, and it’s shaking up the U.S. manufacturing industry while making significant in-roads into all sorts of higher-tech and white-collar venues (animated films being just one of the latest—so watch out Pixar and Disney!).
China’s revolutionary impact on globalization is, as my friends at Cantor Fitzgerald predicted years ago, changing the very core rule sets of the global economy. It’s changing them to the point where America’s conventional wisdom on trade and globalization (i.e., that it’s fundamentally good over the long run) is under attack.
Not to make light of anyone’s economic angst, but it reminds me of when America decided to let NBA players start playing in the Olympics while the NBA simultaneously started luring star players from other countries to join the league. Everyone on our end was like, “Yeah, now we’ll show them what real competition is!” But by globalizing the NBA and filling its ranks with foreigners, we leveled the playing field over time to the point where now, NBA players are playing on almost everyone’s national Olympic team, so guess what? Now we can’t win gold medals with ease anymore even when we stock our “dream team” with NBA stars!
China’s rise is like that, I think. Economists who went on and on about globalization always being good for America seem somewhat flabbergasted to admit now that—geez!—it’s actually going to make things awfully hard and competitive for the U.S., meaning it will force dramatic internal changes (all desired and needed) upon us or we’ll suffer in the end. So globalization has gone from being a big win for an America that didn’t have to change itself much at all to one in which it’s—at best—a tough victory for an America only if its willing to revamp things like how it thinks about debt (both personal and public) and how it educates its people throughout their lives (and not just at the beginning).
Economic competition within the United States, the world’s oldest and most successful economic and political multinational union, has always been fierce. By replicating that source code across the Core as a whole in this era of globalization, we’ve enlarged the playing field dramatically, pulling in all sorts of previously “frontier” areas full of people who are desperate for better lives and willing to work their asses off to achieve it. Trying to deny their entry is a lose-lose and we all know it, but clearly we’ll have to adjust not just our economic and political rule sets to accommodate that new competition, but those of the Core as well.
This is why I say that America’s number one strategic relationship for the next twenty years or more will be China—and to a lesser extent India. Adjusting the Core’s rule sets to accommodate those two states’ integration into the global economy is the most important foreign policy and—frankly—national security task that we face right now and for the foreseeable future.
Yes, I want to transform the Middle East, but that’s a secondary goal to securing both China and India as long-term strategic partners—economic partners, political partners, security partners.
China’s rise is very similar to that of America’s at the beginning of the 20th century. That’s why a Wal-Mart will let its workers there remain in unions even though it doesn’t here at home. I know that flabbergasts some people: “But China’s communist for crying out loud!” No, it isn’t. It’s very capitalist while still have a significant state sector. In the capitalist portions of its economy, it very much resembles the rough-and-tumble labor world of the U.S. at the beginning of the 20th century, and that’s why it still makes sense for unions to exist. I mean, don’t you want those unions to force Wal-Mart (and every other manufacturer there) to pay their labor better there so the goods they produce/sell cost more and thus reduce China’s “price” over time? Of course you do.
China’s “price” will grow less competitive the more it integrates with the global economy. It happens to everyone. So, in reality, China’s rise is less a threat the more it unfolds, so long as we don’t fix to make them our enemy for lack of imagination. China will dominate Asia, and that domination will lead to the rise of an EU-like entity there in which China will be the obvious center of gravity. We want that to happen, because it secures China in the Core and makes Asia a peaceful, prosperous place.
But for that to happen, there will have to be a NATO-like entity there to mitigate and ultimately eradicate lingering security issues, and getting that process to unfold and to include a U.S. as a founding member is another key task of U.S. foreign policy over the next two decades.
But as you know, alliances rise either out of shared fears or a common victory. There doesn’t seem to be enough shared fear right now, so where do you think we might achieve a common security victory in Asia right now?
Hmmmm.