Engaged!

[Christoper Padilla by Al Diaz for the Miami Herald]

In 2000, under the direction of the Clinton Administration, the US found itself at a critical juncture for decision: further integrate China into the global economy, or throw away decades spent building a trusting relationship?

Now, with the deepening bilateral trade deficit, the US finds itself at a similarly critical junction in 2008, under the Bush Administration. January 30, 2008, Under Secretary of Commerce for International Trade Christopher Padilla spoke in DC on "Economic Engagement with a Rising China." Padilla relayed that moving forward, the US will continue to carefully monitor engage China:

 "Here in the United States, support for engagement does not mean blindness to the enormous challenges resulting from China's economic rise. Just as the world watches closely when the United States holds an election or the Federal Reserve makes decisions about interest rates, it is appropriate for Americans to watch the hints that China is backing away from open trade and economic policies."

To summarize the challenges the US faces in maintaining its economic relationship with China:

1. Neutralizing the effects of Chinese policies favoring Chinese national firms over foreign firms, an example being the "Anti-Monopoly Law."
   
2. China's (lack of) regulatory structure, from which piracy, counterfeiting, and the production of unsafe products are growing; the effects of which, Padilla has personally felt: "My own dog had been eating some of the pet food contaminated with melamine from China."
   
3. Economic imbalances, such as China's capital accumulation, which hinder trade relationships with other countries.

The US' three-pronged economic strategy ("dialogue with intelligent use of leverage") to engage China:

1. Continue to use the JCCT and SED as vehicles for bi- and multi-lateral dialogues. Upping-the-ante by reigning in trade allies Japan and the EU will not only put some teeth behind Washington's words, but ensure that its efforts are not being undercut by backhand third-party trade deals.
   
2. Leverage the WTO's dispute settlement system. Outsourcing the gritty details of how issues such as the protection of intellectual property rights, discriminatory taxation systems, and market access are resolved will really allow us to focus on further engaging China positively.
   
3.  Rigidly enforce US trade remedies, in response to issues such as dumping and government subsidies.

Striking a balance between preemptively employing punitive measures to isolate China and risk trade retaliation, and failing to stand its ground on progress that has been made, the US' strategy is to avoid "pushing China in the wrong direction" by pulling it in the right one.