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Trade Is War, By Other Means

12:00 AM, Feb 18, 2012 • By IRWIN M. STELZER
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Xi Jinping, the heir apparent to the leadership of the Chinese Communist regime, came to America to meet the president, dine with the vice president, visit a farm in Iowa—following in the 1959 footsteps of Nikita Khrushchev—and attend a basketball game in Los Angeles. The Iowa visit was designed to remind Americans that Xi, who visited Iowa 27 years ago, has a long-standing attachment to America, reinforced by the fact that his daughter is attending Harvard, and that Iowa’s farmers rely heavily on income from exporting their agricultural products.


In Washington the talk was about trade, giving the campaigning president and vice president an opportunity to demonstrate their undying loyalty to American workers by loudly reminding China’s vice president that trade can “only be mutually beneficial if the game is fair.” But for President Obama, who only recently had recommended that serious students of international affairs read Robert Kagan’s latest book, The World America Made, trade was the least of the issues confronting the two nations, the proverbial tip of a rather large iceberg capable of doing considerable damage to the America.

Not that trade issues are entirely irrelevant. The president is counting on rising exports to keep the current recovery on track, making it easier for him to defeat whoever survives the Republicans’ efforts to self-destruct. With Europe entering or already in recession, the Chinese market beckons, even if that country’s growth rate slows from the torrid double-digit rate of recent years. But the Chinese regime is in no mood to play by rules that the Americans consider “fair.” They need to provide millions of jobs for an increasingly restive work force, which means keeping the export machine running at full tilt, and doing whatever is necessary to foster the development of state-owned enterprises (SOEs) that can sell their wares in international markets, displacing competing American firms.

Although Xi listened politely to the litany of American complaints, China will continue to manipulate its currency, holding down its value so as to stimulate exports and discourage imports. The regime continues to require U.S. companies to turn their technology over to subsidized Chinese SOEs if they are to be given access to China’s markets. SOEs are directed to buy high-tech products from the hometown boys in order to foster development of industries of the future. The regime does little to prevent piracy of U.S. technology and materials protected by copyright. Non-tariff barriers to imports abound.

Xi, yet to be officially confirmed, was in campaign mode almost as much as Obama and Biden, although his constituency in a country of over one billion people is much smaller than Obama’s: the Communist party ruling elite. “We hope the U.S. side will take steps to address Chinese concerns,” Xi told reporters.

The least of those concerns relates to trade, although Xi undoubtedly repeated his country’s worries that American inability to control its deficit—President Obama’s new budget is splashed with red ink—will eventually lead to a devaluation of the mound of dollars salted away in China’s vaults. He also complained about U.S. restriction of exports of many high-tech products, stuff the Chinese need for their development and, presumably, to provide raw material for its intellectual-property pirates.

For Xi, his visit to the Commerce Department and a gaggle of CEOs, many of whom are less willing to overlook China’s assaults on free trade than they were a few years ago, was surely of less interest than his visit to the Pentagon where, after receiving a 19-gun salute, he met with Defense Secretary Leon Panetta and General Martin Dempsey, chairman of the Joint Chiefs of Staff.  Xi, who began his career as an aide to an army general and is vice chairman of China’s Central Military Commission, is better connected with the Chinese military than President Hu Jintao, who is completing his 10-year term in China.

Which brings us back to Bob Kagan. Kagan, one of Mitt Romney’s foreign policy advisers, became an Obama favorite whose essays get a paragraph-by-paragraph analysis at the White House. This, even though Kagan argues that the president’s favored international institutions can never replace American power as defender of the liberal economic and political world order. But, hey, you can’t expect the president to agree with every jot and tittle of an academic’s scribbling, only those parts that fit his campaign narrative.

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