OPINION> Commentary
Multilateralism key to navigating rocky path
By Xiao Lian (China Daily)
Updated: 2009-02-24 06:53

The United States has long maintained consistency in its policies toward China. To realize US national interests, containment and engagement have been alternately applied under both Republican and Democratic administrations in the past.

Confronted by the most serious economic crisis since World War II, US President Barack Obama is yet to grapple with a series of intractable economic issues from how to revive a crumbling economy to how to stop the domino collapse of banks and auto sectors and curb rising unemployment. In the $787 billion stimulus bill the new president urged the Congress to pass, a "buy American" article was included. Not applicable to Canada and European Union members, the trade protectionist measure is mainly targeted at China and other developing countries.

To reduce the US trade deficit, the Obama administration is expected to revise the North American Free Trade Agreement in the hope of increasing employment protection for American people. Also, the new US administration will once gain link its trade with other countries to their environmental protection and carbon emissions. All these moves will inevitably add to frictions and disputes between China and the US on such long-standing issues as the trade balance, exchange rates and intellectual property rights (IPR).

The Obama administration is not expected to ease a long-term ban on the export of US high-tech products to China because of the ongoing economic crisis. The Section 301 of the 1974 US Trade Act will continue to be implemented to maintain its high-tech advantage.

Different from its predecessor, the Obama administration is expected to seek multilateral cooperation to solve international disputes and attach more importance to non-traditional security issues, such as climate change, economic distress and natural disasters. It will encourage an emerging China to undertake more responsibilities in international affairs.

In dealing with China over the past three decades since diplomatic ties were established, the US has garnered handsome profits as well as cheap but good-quality Chinese products for American consumers. However, what China has gained is mainly a large stock of devalued US dollars and debts. This was in exchange for the country's cheap labor and costly natural resources.

The US financial and economic problems, triggered by its mortgage crisis, is not only an adjustment in its economic cycle, but also an outbreak of the intrinsic contradictions of capitalism. The crisis will inevitably cause the decline of the superpower's comprehensive national strength and its global hegemonic position. To deal with the ever-deepening economic crisis will be atop the Obama administration's agenda. Washington's overwhelming priority on domestic economic matters will undoubtedly dent its influence on the international stage. With declining international clout, unilateral action is likely to give way to bilateral and multilateral cooperation.

With rapid economic development over the past three decades since the reform and opening-up initiative, China's annual gross domestic product has increased to $4.5 trillion, roughly a third of that of the US, and ranking third largest in the world. Its foreign reserves have surpassed $2 trillion. The ever-growing national strength has consolidated the country's attempts to push forward a new economic development strategy and increased initiatives to develop Sino-US economic ties.

China should actively participate in the Group-20's multilateral cooperation and undertake international economic responsibilities and obligations commensurate with its national force. It should keep a neutral stance on struggles between the US and the other six Western powers in the G-7 club. The country also should demand G-7 members to acknowledge its market economy status in an effort to promote a new international financial system.

For more effective international economic cooperation, China should urge the World Bank and International Monetary Fund (IMF) to carry out some necessary reforms and listen more to the voice of developing countries. Developing nations' presence in the World Bank should increase to 50 percent, not the 44 percent proposed by WB President Robert Zoellick.

The established IMF provisions should be revised to reduce Washington's unreasonable privilege.

The country should insist on free trade and market principles to raise its international image as a responsible power. Also, it should adjust its foreign reserve and resource reserve structures to preempt any destructive influences to be brought by a shift in US monetary and financial policy.

The country should adjust its export structure to the US and actively tackle emerging disputes with the largest economy on trade, exchange rate and IPR issues. It should also step up scientific and technological innovation and expand exchanges with the US and European countries in this regard.

The author is a researcher with the Institute of World Economics and Politics under the Chinese Academy of Social Sciences

(China Daily 02/24/2009 page8)