US Cries Foul Over China Fair Play
the United States facing the threat of an economic 9/11 as Chinese
corporations supposedly get ready to take control of US businesses
and the entire economy?
is certainly the impression one would get after listening to the
anti-China rhetoric out of Capitol Hill, after one of China's state-controlled
oil companies made an unsolicited US$18.5 billion bid for Unocal,
the California-based gas company, and thus demonstrated its willingness
to engage in a takeover battle with Chevron Corporation, which offered
US$16.5 billion for the company.
bid by China National Offshore Oil Corporation (CNOOC), China's
third-largest oil company, for America's ninth-largest energy company
could prove to be a defining moment in the relationship between
the two nations.
political outcry in Washington over CNOOC's bid for UNOCAL reflects
a recognition among US elites that China has become a major contender
in the global economy and that its companies are ready now to pick
fights with their American counterparts – and perhaps are even able
to win from time to time.
Chinese accession to the World Trade Organization (WTO), the debate
here has focused on whether China was ready to play by the rules
of Western-style capitalism.
that China seems to be playing by those rules as one of its companies
asks that Unocal's shareholders approve the proposed deal, the question
is: Will the political elites in Washington respond to China's economic
rise by trying to use the power of the state to prevent Chinese
capital from flowing into the American market, and hence pose a
clear challenge to the same rules of free-market economy that the
US is supposedly promoting worldwide?
to isolationist trade policies would be ineffective, disruptive
to markets and damaging to America's special role as the world's
leading advocate for open markets," US Treasury Secretary John Snow
reminded US lawmakers, responding to their pressure to "do something"
to prevent CNOOC from acquiring UNOCAL and to force China to lift
its capital controls. Federal Reserve chairman Alan Greenspan also
sounded a cautionary note during an exchange with lawmakers, arguing
against moves to punish China over its exchange rate system.
debate on China reflects the angry nationalist mood in the US capital
where growing frustration over the failure to end the anti-American
insurgency in Iraq seems to be spilling over into other foreign
the same time, discontent over the problems facing the US economy
– including the decline of manufacturing industries, the outsourcing
of service jobs and the expanding US trade deficit (including with
China) – has led lawmakers to search for foreign scapegoats.
result is that China is regarded now as an easy target for politicians
trying to demonstrate to the American people that they are fighting
for their interests, not to mention the fact that bashing China
helps lawmakers win brownie points (and campaign contributions)
from powerful lobbyists representing industries requesting government
protection from Chinese and other foreign competition.
perception that China is emerging as an economic threat to the US
also intertwines with the concerns in Washington over China's military
challenge that was stressed by Defense Secretary Donald Rumsfeld
in his recent address in Singapore.
it was not surprising that the rising anti-China hysteria reached
a dramatic level during last Thursday's hearing under the auspices
of the Senate Finance Committee convened to discuss a proposed bill
to impose a 27.5 per cent tariff on Chinese imports unless China
allows its currency to rise against the US dollar.
Senator Lindsey Graham from South Carolina (which happens to be
a state where textile industries threatened by foreign competition
are located), a co-author of the legislation, suggested during the
hearing that the bid by CNOOC "threw gas on the fire."
it has provided demagogic China-bashing lawmakers like Mr. Graham
and Democratic Senator Charles Schumer from New York with an opportunity
to accuse China of threatening to devastate American economic growth
doubtful that the owners of US businesses making money in China
or the American consumers benefiting from low-cost Chinese imports
share the view that the Chinese are threatening their economic interests.
At the same time, lawmakers on the political right are depicting
the Chinese bid for UNOCAL as a threat to US national security and
argue that it should be seen as part of a coordinated strategy by
Beijing aimed at eroding American energy security.
Representatives Duncan Hunter and Richard Pombo, both from California,
a state whose economy benefits from American trade with China, have
asked that the Chinese bid be referred to the US Committee on Foreign
Investment (CFIUS) to study whether the sale of UNOCAL to a Chinese
company threatens US national security.
CFIUS is a secretive interagency established in 1988 with the mandate
to review foreign investment and ensure that it would not threaten
US "national security." Almost all the previous investigations had
to do with concern over sensitive US technology falling into the
hands of America's global rivals. But the hawks are hoping that
a possible rejection by the CFIUS of CNOOC's bid would help establish
that, first, America's energy companies are "strategic assets" and
that, secondly, Chinese investment in such "strategic assets" should
one finds many of the "usual suspects" on Capitol Hill trying to
raise the political heat when it comes to China, it's quite distressing
to learn that even pro-free market lawmakers from both political
parties are pushing for a trade fight with China. According to some
news reports, there is rising support on Capitol Hill for a bill
proposed by senators Susan Collins, a Republican from Maine, and
Evan Bayh, a Democrat from Indiana, that would require the Commerce
Department to respond to alleged illegal Chinese export subsidies.
senators Collins and Bayh are two leading centrist and free-traders,
as is Senator Ron Wyden, a Democrat from Oregon, who is demanding
that the Bush administration take a tough stand on CNOOC's bid.
"I don't think that being a free trader is synonymous with being
a sucker and a patsy," he stated last week.
back is not protectionism" is the way Mr. Graham described the,
well, protectionist mood on Capitol Hill. "No more sabre-rattling.
We want results," he told Mr. Snow.
interesting to note that some of the lawmakers who have been igniting
political fears of China's economy and rallying against its unsolicited
bid for UNOCAL had also voted in favor of China's entry into the
WTO – a move that was based on expectations that China would be
committed to play by international economic rules, and it should
thus be encouraged to join and integrate itself into the global
that context, CNOOC's bid should be regarded as a cost-effective
move by a Chinese company to boost reserves in order to meet China's
energy demands. In fact, CNOOC's bid should be welcomed by America's
lawmakers since the Chinese company is acting like a responsible
capitalist player by trying to win over UNOCAL's shareholders.
has not prevented other foreign state-owned companies from buying
US assets and by specifically targeting a Chinese state-owned company,
it is Washington's lawmakers who would be – and rightly so – accused
of violating the rules and the spirit of global capitalism.
Hadar [send him mail] is Washington correspondent
for the Business Times of Singapore
and the author of the forthcoming Sandstorm:
Policy Failure in the Middle East (Palgrave Macmillan).
© 2005 Singapore Press Holdings Ltd. All rights reserved. Reprinted with
permission of the author.