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Sunday, December 2, 2012

China or USA: Which Will Rule Trade?

The Association of Southeast Asian Nations (ASEAN) announced at its meeting in November 2012 that it would host negotiations among its members on “a sweeping trade pact that,” according to the New York Times, “would include China.” The trade agreement would include not only the ten countries that are in the association, but also six other countries that have free-trade agreements with the association. In addition to China, those countries include Australia, India, Japan, New Zealand and South Korea. Half of the world’s population would be included in the pact. Notably absent is the United States. This is no accident, as the Obama administration’s own proposal for an eleven-nation Trans-Pacific Partnership excludes China. In other words, the contending proposals may be more about a “control battle” between two contending empires—the United States and China—than anything else. Moreover, which proposal succeeds could say something about whether China succeeds the United States as the hegemonic super-power of the twenty-first century.
 
                                                    Barack Obama and Wen Jiabao: A contest of wills at the East Asia Summit in 2012.   Jason Reed/Reuters
That the immediate issue was that of China’s inclusion or exclusion can be gleamed from Barak Obama’s statement during one of the presidential debates in 2012. “We’re organizing trade relations with countries other than China so that China starts feeling more pressure about meeting basic international standards.” The inclusion of basic can be read as a slight against China. However, that protecting state-run enterprises as done by China would continue to be allowed under ASEAN’s Regional Comprehensive Economic Partnership suggests that what the U.S. takes to be settled in terms of what constitutes the basics of international trade may not have been so settled after all. China could point to U.S. companies being able to deduct expenses on their income tax forms as a form of government aid to the home team. Since at least the mercantilist era in the seventeenth century, governments have carried out industrial policies designed to profit domestic companies and increase tax revenue. Laissez-faire-based trade may not be realistic, considering the myriad ways in which governments interact with business. Regulation itself, in being of a strategic to some firms more than others, could have a differential impact on domestic and foreign firms. It is unrealistic to assume that governments would stop regulating just so the trade is “fair” as well as “free.”
As the twenty-first century was coming into its own, two major economic powers in the world were contending not only for economic dominance, but political hegemony as well. Would it be another American century, or would power follow economic growth over to Asia? The “control battle” itself ostensibly about ordering trade alliances could be an indication that power was about to shift on a massive scale in terms of which economic power would become the definitive superpower.

Source:

Jane Perlez, “Asian Nations Plan Trade Bloc That, Unlike U.S.’s, Invites China,” The New York Times, November 21, 2012.