USA & China: Strategic Alliance or Diplomatic Affairs

Since last three decades, the USA administration has made plans to get tougher for their challengers: the difference is first it was Japan and now it is China. Getting tougher to the countries like China and Japan had already been a plan of the Clinton government also long back in 1992 and that was his electoral campaign too. But, when there was a necessity to file a case against Japanese auto policy in 1994, looking at the possibility of instability of the financial markets, Clinton government backed off. Clinton government was the one who actually made grounds for China to enter into the WTO but Bush government never wanted to see China as its strategic partner. Bush’s era was all about wars and not much of significant economic decisions.  Obama, in his first term already had a plan to be tougher in China than the Bush government earlier and records show that in the last four years- the Obama administration has filed more trade cases against China than the Bush government. After the presidential election results, it was all clear that more complaints about the Chinese subsidies and trade cases may be filed with the WTO; pursuing the multilateral dispute settlements and avoiding the direct bilateral confrontation with China.  And doing trade agreements like Trans-Pacific Partnership (TPP) with high standards and excluding China.

As expected, Mr. Robert Hormats from USA made an official visit to China few weeks back which was taken by the world as an economic confrontation. It seemed as if USA now wants to establish a bilateral economic relationship with China exploring all the possibilities for the mutual benefits and emphasizing the win-win cooperation. He tried to show how imports from China increased to $399 billion and exports to China increased to $103 billion in 2011 showing a 4-fold and 5-fold increment simultaneously in last ten years. There were talks to continue very popular USA-China Science & Technology Agreement launched in 1979 by Deng Xiaoping and President Carter. The diplomatic threat was also given to China about the maintenance of Intellectual Property Rights and its protection. He pointed out that USA understands the importance of investments, high quality investments rather and promote new competitive goods in the market. He also tried to convince China that their investments and companies are very essential for the creation of jobs and market competition in USA.

Whatever is said by the USA authority, the reality remains that Chinese investment will continue to grow in USA and unless and until the dependence on the Chinese loans to lessen the trade deficit in USA shrinks, these economic frictions and strategic relationships will continue.

Note: This article was published in The Himalayan Times, Perspectives