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.”
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