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By Ian Bremmer
Not so long ago, it seemed there was no U.S.-Chinese diplomatic conflict that the booming bilateral business relationship couldn't trump. In April 2006, when Chinese President Hu Jintao stopped in Seattle on his way to Washington. D.C., it seemed that private industry based in "Washington the state" had sidelined elite-level politics in "Washington the capital" as the force behind an increasingly profitable partnership.
Chinese firms had just placed a $5 billion order with
Things have changed, and many of the same Washington state-based iconic brands have come to symbolize the widening divide in U.S.-Chinese commercial interests.
When
That conflict has been resolved, for the moment, and Beijing has renewed
Officials at
None of these other companies has followed
How did we get here? For three decades, China has increasingly welcomed foreign companies and their investments in the country, in part to help Chinese firms gain access to the management skill, marketing savvy and advanced technology that only foreign firms could provide -- assets that would one day help China climb the value chain and build a 21st century economy. The strategy has proven a resounding success. Many U.S. firms have proven indispensable partners in the country's growth, earning handsome profits in the process.
But as Chinese companies have found their footing, some of them have come to see American companies less as potential partners or storehouses of valuable knowledge than as direct market competitors. To push their growth to the next level, some of them have begun to use political connections in Beijing and within local governments to push for laws, regulations, subsidies and countless other tools to tilt the commercial playing field in their favor and at the expense of the foreign competition.
As a result, U.S. and other foreign companies operating in China will have to make some tough calls and revisit central assumptions about how long they'll be welcome. For many years, expectations of game-changing profits have persuaded them to accept the many risks that come with doing business in an authoritarian country where rules of the game are not always fairly enforced. For the most part, the fittest have reaped the rewards. Anxious to safeguard access to still-inexpensive Chinese labor and the surging number of Chinese consumers with money to spend, many within the American business community have publicly opposed threats from Washington to redress currency distortions and an imbalanced trade relationship with punitive trade legislation.
That, too, has changed. As many U.S. firms see their competitive advantages slipping away, they're turning to Washington for help. Ironically, the man who arranged Hu's visit to Washington state four years ago, then-governor Gary Locke, is now the Obama administration's commerce secretary. On Aug. 26, Commerce proposed 14 measures intended to tighten enforcement of laws aimed at halting unfair trade practices from non-market economies like China.
In general, the Obama administration has tried hard to keep relations with China on track, most notably by delaying a decision on whether to formally charge China with currency manipulation. But with U.S. unemployment hovering stubbornly near 10 percent, midterm elections looming, congressional Democrats in desperate need of a scapegoat, U.S. business leaders asking Washington to pressure Beijing, and China looking to gradually reduce its dependence for growth on the spending habits of cash-strapped U.S. consumers, it will take much more than another decision to kick the can down the road to restore the world's most important relationship to a more solid footing.
Ian Bremmer is president of
Available at Amazon.com:
The End of the Free Market: Who Wins the War Between States and Corporations?
Running Out of Water: The Looming Crisis and Solutions to Conserve Our Most Precious Resource
Bottled and Sold: The Story Behind Our Obsession with Bottled Water
Water: The Epic Struggle for Wealth, Power, and Civilization
At War with the Weather: Managing Large-Scale Risks in a New Era of Catastrophes
© Ian Bremmer
WORLD | AFRICA | ASIA | EUROPE | LATIN AMERICA | MIDDLE EAST | UNITED STATES | ECONOMICS | EDUCATION | ENVIRONMENT | FOREIGN POLICY | POLITICS
World - Widening Divide in American-Chinese Commercial Interests | Global Viewpoint