Monday, December 22, 2014
By Jeff Bergner
Tribune News Service
Former World Bank president Bob Zoellick encapsulated American policymakers’ hopes for a growing China: China should become a “responsible stakeholder” in the world economic and political system.
To date this notion has largely been interpreted as foreign policy guidance. American diplomats work to channel China’s pursuit of regional security objectives into peaceful undertakings and without the threat of military force. They work to gain China’s cooperation in addressing worldwide issues like nuclear proliferation and climate change. And they work to shape China’s foreign assistance program to respond to humanitarian needs and not simply to benefit China’s mercantile interests.
What is less well understood is that being a responsible stakeholder entails fair and open economic policies as well. This includes both China’s export policies and its regulation of foreign firms doing business in China. Here is where the U.S. confronts a growing problem.
The rhetoric on both sides is solid. President Obama said in Beijing recently “we look to China to create a more level playing field on which foreign companies are treated fairly so that they can compete fairly with Chinese companies.” And President Xi for his part said recently that “we shall proceed with reform and opening up without hesitation.”
Economic practices
Unfortunately, however, China’s deeds do not match its words; its economic practices are moving in exactly the wrong direction. Foreign businesses generally, and American businesses specifically, are increasingly singled out for different — and far harsher — treatment than Chinese businesses. This is true across the board and across all sectors of business. It is true of new business license applications, approvals for mergers, pricing decisions and generally accepted business practices. U.S. businesses report an increasingly unfriendly atmosphere in China, and new foreign investment in China has slowed appreciably.
There is one area in which Chinese regulatory practices have been especially egregious, and that concerns food and drug safety. Every nation certainly has the right, and even the obligation, to enforce regulations guaranteeing the safety of food and drugs. There is no doubt about that. But China has gone about this in a clearly anti-foreign manner.
Examples abound, but perhaps the poster child for selective regulatory overkill concerns the U.S. food processing firm OSI. OSI processes meat and poultry for the Chinese fast food market. OSI’s Shanghai plant was raided by Chinese authorities on the basis of the flimsiest and most contrived allegations. Its plant was shut down, its employees idled and its management detained. What is especially troubling is Chinese government behavior not only during such raids, but in their aftermath. Business managers have, in this case as in others, been “detained” (sent to prison) on no clear charges, and held in order to produce “confessions” of wrong-doing as a condition of their release. This procedure flies in the face of any notion of transparency or due process.
Contrast this with Chinese behavior in the United States market. China’s Taishan Gypsum Company supplied the U.S. market with defective, dangerous drywall which was used in the construction of thousands of U.S. homes. Taishan is part of the China National Building Material Corporation, which in turn is run by the State-Owned Assets Supervision and Administration Commission. Taishan is a Chinese government-run corporation. And what position did this corporation take in U.S. legal proceedings? Taishan’s attorney argued that its actions in the United States could not be controlled by the American legal system and that cases involving Chinese exports should be adjudicated under Chinese law.
Double standard
What is to be done about this obvious, and growing, double standard? American businesses in China are constrained by the fact that they must seek justice from the very government which allows them to operate in China in the first place. For this reason, there is a clear role for the U.S. government to play in addressing this growing problem.
The U.S.-China Joint Commission on Commerce and Trade which is meeting in Chicago this week would be a good place to start. This should be an occasion for some direct talk about China’s growing double standard.
More than that is required. The U.S. ambassador to China, Max Baucus, has a strong background in international finance, dating back to his days as chairman of the Senate Committee on Finance. He understands the problem of selective Chinese enforcement against U.S. businesses. He needs strong backing from the State Department in Washington, however, in order to successfully address this issue.
U.S. businesses have been one of the strongest voices advocating an expanded relationship between the U.S. and China. They have unfailingly advocated engagement, while other voices have focused on the more divisive issues of human rights violations or Chinese policies toward Taiwan, Tibet, North Korea or Taiwan. American businesses have argued that an expanded economic relationship with China is an important way to open up China, expand its middle class and move its government in a more democratic direction. In the wake of China’s growing double standard over business practices, it is becoming harder and harder for American businesses to play this role.
There is a vital role for the Congress to play as well. When the new Congress convenes, announcement of an early set of hearings on the U.S.-China economic relationship would be entirely appropriate. A joint hearing including both the Foreign Relations and Commerce Committees in either or both houses would be a way to elevate the importance of these issues.
‘Feet to the fire’
Congress has often played the role of keeping both China’s government and the U.S. administration’s “feet to the fire.” This has been the case regarding China’s policy toward Taiwan, China’s policy toward Tibet, China’s one child policy and China’s currency exchange rate. Congress can, and should, play this role here as well.
The U.S. and Chinese economies are now roughly the same size. China is a competitive economic world power and there is no reason for it to operate on a different, and preferential basis vis-‘-vis America. This problem should be met head on before it jeopardizes the overall relationship between the two largest economies in the world today.
Jeff Bergner is a lecturer at the Batten School of the University of Virginia. He previously served as staff director of the Senate Committee on Foreign Relations and as Assistant Secretary of State. Distributed by Tribune Content Agency, LLC.