pressure on Iran

By: Ms. X | Tuesday, March 20, 2007 at 10:54 AM | |

China what?

The Bush administration, in particular, has been criticized for its confusing perception of China. Although it often difficult to draw a line between a “right” and “wrong” answer in the realm of foreign policy, the Administration has engaged and enraged China in recent years.

It might have been Clinton’s Democratic flair to push for engaging China as a partner, but by the dawn of 2001, his years of attempting to romance China into a substantial cooperative relationship were overridden by Bush’s “to fear or not to fear” outlook on the East Asian giant.

If the U.S. took a hearty tip from some of China’s geopolitical neighbors in the Asia-Pacific region, it would not take a lot to determine that the greater threat is a weak China. Also, Chinese leaders never tire of iterating that displacing U.S. power is not on the foreign policy agenda. Even Prime Minister Wen Jiabao has been quoted as reminding the rest of the world that China’s surging economic growth can often be, “unbalanced, uncoordinated, unstable and unsustainable.”

In response to China’s military expenditures, the CIA World Factbook ranks China at 27 with expenditures totaling 4.3% of GDP. The U.S. is not far behind at 30 with expenditures at 4.06% of GDP. Given China’s estimated $10 trillion GDP and the United States’ $13 trillion GDP, China still spends less than the U.S. does on arming itself.

China also creeps way behind the military spending of some developing countries, who boast an estimated 13% of GDP.

However, numbers can be difficult to digest. The psychological threat of China's rise could be observed by taking a look at every day items that contain the perennial MADE IN CHINA emblem. The truth remains that China is more present in an average person’s life than before. And China is here to stay.

So what must be reformed on the U.S. agenda? As the Asia-Pacific grows into a more dangerous environment with the North Korean nuclear negotiations, China remains a strong contender for a U.S. ally on regional and global peace.

Maybe its time for the Administration to classify this threat as a “false alarm.” China’s peaceful rise need not stir a repeat of the Cold War’s mistakes. It’s about time the U.S. took advantage of the opportunity China presents to the world.

By: Ms. X | Monday, March 19, 2007 at 1:43 PM | |

let's Doha it again?

With the memory of the Doha Round collapse in July 2006 still fresh in the minds of foreign economic policy-makers, is it too early for the world to consider returning to the negotiating table? Members of the developing world are still waiting for their chance at equity in the often chaotic arena of the global economy, and the trade round format is all the international system has to serve these needs. Though the stalemate that ensued in 2006 led to skepticism regarding the World Trade Organization’s credibility as an international forum for economic policy, it has the potential to redeem itself, given that members of the developed world are ready to make concessions on liberalization.

Despite the features of the WTO that arguably restrain the organization’s chances at success, Doha’s predecessor, the Uruguay Round managed to formally establish the WTO in place of the General Agreement on Tariffs and Trade. The Uruguay Round also started negotiations on the General Agreement on Trade in Services (GATS) and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The fruit of the ambitious Uruguay Round most certainly reflected on the growing impact of the WTO on multilateral trade, but the succeeding Doha Round produced a lost opportunity for the developing world, in particular.

Doha’s focus on development highlighted negotiations to offset the negative effect of uneven development, but negotiators often seemed unclear on how development should be promoted. Would more or less trade benefit the developing world? Most members of the developing world clearly wanted more opportunities to trade.

One of the main causes for the failure of the Doha Round was the stalemate that ensued regarding agricultural and industrial exports. The strength of the G-20, a predominant bloc of developing countries led by Brazil, China, India, Indonesia, and South Africa allegedly prevented the bigger economic players, such as the U.S. and the European Union, from reaching a concession. Members of the G-20 were adamant about the agricultural protectionism that seemed characteristic of the developed world’s economic policies, which made them unable to compete in the global market.

While the developed countries pursued an agenda to open up trade from the countries of the developing world, they barely made concessions to open up their own trade for the sake of protection.

Developed countries also negotiated on Non-Agricultural Market Access (NAMA), which called for drastic cuts on the non-agricultural tariffs of developing countries. In exchange, the developed countries offered to cut their own tariffs by a small amount. This inequitable offer, was, naturally, refused by the members of the G-20.

It was no secret that the liberalization mechanisms sponsored by the WTO were bound to leave much discontent in the developing world.

Since the high-profile collapse of the Doha Round last July, there have been low-key negotiations with smaller groups of countries on a follow-up to the round. The U.S. and the EU in particular, have met with leaders from Brazil and India regarding making further concessions to possibly resuscitate earlier negotiations on tariffs and subsidies for protection. Although ongoing negotiations are reportedly making progress, there have been setbacks on formally restarting the talks at the WTO. Disagreements between the U.S. and the EU and missed deadlines have loomed over the heads of the diplomats involved, pressuring several to quicken the pace of negotiations.

And it’s about time. Merely letting the failure of the Doha Round sit on the plate of foreign policy was not going to foster a settlement between the battling divisions of the international community. The reported “quiet diplomacy” that has taken the place of formal negotiations has led to accusations of a lack of transparency.

Seeking an optimal point for the relationship between protectionism and liberalization of trade is going to be the biggest hurdle for the forthcoming negotiations. But what is prescribed by economic models is not always the final solution in the global economy, where the assumption of ceteris paribus has no place. However, the issue of developed countries’ protection emerged prior to the Doha Round. It merely reached a messy apex during the actual trade round negotiations, and it is about time to reconsider a change in policy.

Richard Fisher, president and chief executive officer of the Federal Reserve Bank of Dallas recently indicated during a statement to the Pacific Council on International Policy, “Do everything you can to resist the temptation to protect… we benefit by having an open world to sell into.” Despite the outcome of the Doha Round, the structure of the global economy remains predominantly protected by sovereign governments, all of which are at different stages of economic development.

Grasping the concept of less-than-full reciprocity will be critical for establishing a stronger foundation for the next trade round. When the developed world heads back to the negotiating table, the countries must be prepared to make significant concessions in order to strike a sound agreement. If this would mean liberalizing trade, maybe they could consider it a gesture made to revive the credibility of the WTO and restore justice in the global economy.

Not every trade round is doomed to fail, nor is any negotiation on an important issue such as development destined to be neglected by those afflicted by its negative effects. Rounds could collapse but the need for countries to secure stability in the global economy will remain.

By: Ms. X | Wednesday, March 7, 2007 at 11:23 PM | |

what to do about the big C

The boss' remarks found here.

Pacific Council President, Geoffrey Garrett began his keynote address at the Southwest Assembly for the Next Generation Project on The U.S. Global Policy and the Future of International Institutions, held on October 19-21 in Dallas, TX, with a simple question. “What to do about China?” was the focus of Garrett’s address, and how to direct U.S. policy towards engaging China and maintaining stability in Asia.

Garrett noted that in Washington, the administration seems to be avoiding this important question in public, but is privately advocating active engagement of China. One notion seems to be governing Congress, that “China is bad,” but to what extent and in what capacity is unknown. Garrett argued that China should be treated like an opportunity for the U.S. The perception of China as an opportunity over a threat would more likely foster a cooperative environment in Asia, as opposed to a hostile one.

He also addressed the growing concept of a classical divide between U.S. consumers and U.S. corporations, and how these two groups perceive China’s growing role in the international system. Garrett gave the example of Wal-Mart, where China undoubtedly plays a large role in providing low-priced goods to American consumers and manages to push out competition from U.S. firms. The threat this creates for the domestic economy manifests in the large bilateral trade deficit between the two countries, and how it negatively effects overall U.S. economic growth. Garrett noted that several notable figures in the Bush administration have taken significant steps to manage the special economic relationship the U.S. has with China, but they have not been particularly strong in defending their policies.

Garrett offered two points on “what is going to happen” to U.S.-China economic relations, and how this would affect the role of the U.S. in Asian regional affairs. First, he stated that Chinese economic growth will slow down, which would adversely affect the U.S. and the rest of Asia. Garrett argued that China is “not a house of cards” but that China is poised to face several challenges relating to energy, the environment, and the domestic financial system. Although Garrett noted that China’s average of 10% growth per year has had a positive impact on the U.S. and Asia, he argued that the government’s strategy of “fueling growth” through extensive investment in the economy will eventually lead to its downfall. He advocated for moving towards a “gradual equilibrium” between the two economies, and being concerned about China’s economic growth stopping because of the potential destabilizing effects this would create.

The second point that Garrett made argued that there would be an increase in the anti-Chinese lobby in the U.S. He argued that if China’s economy becomes more oriented towards domestic demand over foreign demands for exports, the likelihood of a shift towards U.S. production in China increases. If the U.S. were to move a lot of its production to China, Garrett stated, then the economy will experience further increases in the deficit. Garrett also touched on recent news regarding the massive amount of Treasury bills (T-bills) held by China’s banking institutions. This massive amount of reserves, Garrett argues, should be used to purchase more productive assets to further production and economic growth, instead of sitting idly in the banks.

Garrett also discussed the role of India on this issue, and in particular, if India is “the next China.” He claimed that the pace of Indian economic reform is slowing down, and that there are several reasons for this. The U.S.-India Civilian Nuclear Technology Agreement was one facet that was highlighted, as the political implications of this agreement have resonated in Indian domestic politics. Garrett’s concern regarding this agreement focused on Indian nationalism and the potential effects it would have on the government of Prime Minister Manmohan Singh. As Garrett noted, “his reputation is based on this deal.” The implications this has for India’s desire for a permanent membership in the UN Security Council also presents problems for U.S. nuclear exceptionalism and how it relates to the recent issues with North Korea and Iran. While India’s growth has become politically and economically important in recent years, Garrett argues that India “does not seem economically salient” and India does not play into politics as much as China does.

Garrett managed to discuss the cooperative environment in Asia, as well, citing the failure of the Asia-Pacific Economic Cooperation (APEC) and the relative success of the Association of Southeast Asian Nations (ASEAN) as prime examples of institutional arrangements. While the U.S. played a major role in establishing APEC, the lack of significant action during the Asian Financial Crisis diminished the credibility of APEC as a regional institution. The recent phenomenon of forming institutions in Asia out of the “ASEAN +” framework has been helpful in moving towards what Garrett termed an “Asian community.” The community-building initiatives that have been undertaken by institutions like the ASEAN+3 and ASEAN+6 have shown that Asia may be attempting to mirror the European Community. These multilateral efforts, Garrett stated, have proven three things in Asia. One, that “China is winning.” Although China is not leading any efforts towards stronger regionalism, all multilateral efforts focus on incorporating “a strong China.” Garrett’s second point revealed that “Japan is losing,” as it has become an outsider in the region. Instead of seeking active participation in these efforts, Japan’s attempts to band with other Asian democracies to counterweigh China’s power have been unsuccessful. Lastly, Garrett mentioned that “the U.S. is absent.” While the U.S. remains uninvolved in these multilateral efforts, it has taken on a policy of bilateralism to reach only particular nations, namely China, Japan, and South Korea.

He also connected his points on Asian institutions with the recent North Korean nuclear test. Garrett argued that the Six Party Talks framework with North Korea holds the potential as the “big pearl of security arrangements” that can come about in Asia. Recent agreements by China, Japan, South Korea, and the U.S. to enforce tough sanctions on North Korea prove that greater cooperation is slowly being formed around a potential robust sanctions regime.

Garrett concluded his address with his thoughts on U.S. policies. He noted that “U.S. policy in Asia is out of step with Asian realities,” and recommended that the U.S. change its perception of China to foster greater engagement. With Asian development on the horizon, the U.S. should be looking towards greater integration and support of the institutional architecture in place. Garrett noted that it is important for the administration to figure out what to do, and seek “creative ways to get into the Asian game.”

By: Ms. X | at 12:18 PM | |