CHINA TRADE ISSUE: VERY MUCH LIKE NAFTA By Marc Weisbrot, Center for Economic and Policy Research
First, we should be very honest about the disagreement over the process of admitting China to the WTO and the process of approving or disapproving permanent normal trade relations. It's actually very much like NAFTA. It wasn't because we were against Mexico in any way. We just knew that the purpose of this agreement was to accelerate the process of downward harmonization of wages and living standards and environmental standards. It was very clear from the nature of the agreement that it would do this. I don't really see how this is that different. So I think it is unfortunate that so much of the debate has been shifted to human rights and to a demonization of China and other issues where we have much weaker arguments. I think we're much stronger on the economic arguments.
We're winning, by the way. Let me give you some evidence of this. In Sunday's New York Times, there was a piece by Joseph Kahn, their international economics correspondent, who said that Stanley Fischer, number two at the IMF, says world leaders will have to come up with another way of describing economic integration. You can't use the word globalization any more if the idea is ever to become popular. Lawrence Summers, Treasury Secretary, delivered a long address on world development policy in the Press Club last week, without so much as mentioning the term.
Then there are the polls: 68 percent of people here believe that our agreements with low-wage countries drive wages down in the United States. When asked what they think are the most important things to have in these agreements, they list protecting jobs--which never even comes up in the debate--and the environment, as number one and number two. By large majorities. So we're clearly winning the debate as never before. As a matter of fact, when asked how they identify themselves, the majority--actually, 51 percent--said fair traders; some small percentage said free traders, 10 percent or something; and 37 percent called themselves protectionist--a word that is only used as a pejorative in the mainstream media, which has really reached the level of "communist" in terms of its value. Fair trader is really only used by the progressive community and the labor movement. So clearly we have the majority of the population on our side, for a very good reason.
Let's look at the United States. The median wage today is the same as it was 26 years ago, maybe even a little less in terms of its purchasing power. That means literally that the majority of the labor force has not shared in the gains from economic growth of over a quarter of a century. And there's agreement among economists, even those who are pro-globalization, that the opening up of our economy has had a significant part of the impact. Although there is disagreement as to how much. I have heard that 39 percent of the inequality in wages since 1973 to 1993 was the result of just trade. And of course that doesn't include the major impact of NAFTA and our relations with China, as "investors." That is the consolidation of the ability of U.S. corporations to go to these countries to produce their products, and then export them back to the United States.
We can state plainly to the American people that we want a new deal. Until we get the new deal, there should be no more opening up to trade or investment, and no more commercial agreement. The burden of proof has been shifted. It's on them. If they can't show how people in the United States are going to gain from it, then we don't want it. I don't really see that there's any apology to be made for that whatsoever.
Now I imagine a special case could come up; but certainly not with China, which is a large country and has one of the fastest growth rates in the world, and is perfectly capable of taking care of itself. As a matter of fact, that's another reason why I don't like the China bashing
because China was able to weather the Asian financial crisis better than anyone else. It had a 7.8 percent growth rate in 1998, and something around seven in 1999. While the regional economy was going through recession and depression in countries like Indonesia, they were able to avoid that because they don't have a convertible currency, they don't have significant foreign ownership of equities, and they have state control over the banking system.
I'm not holding any of this up as a model, because even the fixed exchange rate doesn't work in every case. A lot of countries are better off with a flexible exchange rate--it really depends on the country. But it is the only sizeable country in the world that has the degree of national economic sovereignty to actually make these decisions itself. Ironically, the rest of world benefited from their ability to avoid A) the prescriptions from the IMF and Treasury that caused the Asian financial crisis, and B) the prescription that made it worse-the unnecessary austerity policies, and the beggar-thy-neighbor export policies. China also avoided devaluing its own currency and accelerating another round, because it was able to choose its own economic policies. China chose, among other things, to implement a $200 billion public works project to stimulate its own economy.
So that was a proper response to a contracting regional economy. On all those grounds, I don't think we have that much to worry about on China's side. I know the administration is using more and more political arguments to justify this agreement, but let's face it. We all know it's about money. They're there to get into the telecommunications and the financial services markets.
It's going to have a negative impact on China as well. I think there's no doubt about that. And you see divisions within China. You see opposition there. It's more difficult than to oppose the agreement here. But it's not in the interests of the majority of people there either. So I really don't see any apologies that we need to make in this case.
(Marc Weisbrot <weisbrot at cepr.net> is Co-Director of the Center for Economic and Policy Research.)
For the complete presentations as well as a collection of other FPIF documents on U.S.-China relations, visit the China page of FPIF's website: http://www.foreignpolicy-infocus.org/china.html)