China Daily coverage of interview
Friday, December 10, 2010 at 1:37AM
Think tank offers plan for US-China relations
By Ma Liyao (chinadaily.com.cn)
Updated: 2010-12-08 14:23BEIJING - The United States and China are at a point to establish a new collaborative relationship to deal with the possible conflicts emerging between the two big economies, which happen to be the world’s two big militaries, said analysts from a US think tank.
"The basic idea is that we need to clear out some of the strategic mistrust …that has at its roots an imbalanced economic relationship that we seek to radically rebalance in a direct way by encouraging investment from China directly into the US economy," Thomas P.M. Barnett said on Monday in an exclusive interview with China Daily.
Barnett, chief analyst at Wikistrat, an Israeli startup company that offers strategy consulting, is in Beijing to promote the “Whyte-Barnett Solution,” a new China-US grand strategy proposal he proposed together with his partner, John Milligan-Whyte and Dai Min, heads of the Center for America-China Partnership, one of the first think tanks to combine US and Chinese perspectives.
The four-page proposal suggests specifically on the investment floor to encourage large Chinese direct investment into the US market.
"I think the key thing is… to suggest to the American public the win-win opportunity here that … Chinese companies going global doesn’t result in a zero-sum outcome for the West," Barnett explained, adding that “it represents a very positive and potentially a very tremendous large-scale infusion of capital into distressed companies in the US and elsewhere.”
He said that he believed China will be interested in that kind of rebalance, getting the “less useful path” of discussion on the value of RMB off the table.
Talking about the recent military tension in northeast Asia, Barnett said that the key and crucial aspect is to increase transparency between the two militaries as much as possible, especially when there has been a lot of concern about China’s military building.
The US held a meeting in Washington on Monday with Japan and the Republic of Korea to discuss the current security situation in the region, without China, Russia and the Democratic People’s Republic of Korea’s attendance, after rejecting China’s proposal of a meeting among the six.
Barnett said that he didn’t see anything wrong with trying to reassure its long-time allies as long as it quickly progresses into Six-Party Talks, but “you have to include China every step of the way.”
"Because if not, you are not increasing the transparency."
Milligan-Whyte, the co-presenter of the strategy proposal, said that the global financial crisis is actually a good opportunity for China and the US to collaborate on a new strategy.
Between 2000, when China enter the WTO, and 2008, when the financial crisis hit the world, the US dollar appreciated about 40 percent. Between 2005 and 2008, Chinese yuan appreciated about 21 percent. But it did not help the trade deficit, which is around $260 billion to $300 billion a year now, said Milligan-Whyte.
"The trade deficit is caused principally because … the United States doesn’t want to sell high technology to China, which China therefore buys from Europe and … elsewhere," he said.
Milligan-Whyte said that he believed the financial crisis is still in its early stages and anytime in the next two years, the market will just freeze up. And the only thing that can prevent that is “this type of breakthrough in US-China relations.”
"You will see the financial crisis will be very hard for 23% of the American homeowners. It’s going to be 50%. Unemployment will be 25% in some places, and over 10% in others. It’s going to be a really terrible situation. That is going to trigger a new deal between China and the US."
Chinese Premier Wen Jiabao said on Sep 23 in New York while meeting US President Barack Obama that China is willing to push a healthy economic cooperation with the US, in hopes that the US would loosen its export restraints on China.
Chinese President Hu Jintao expressed a similar will months later in November while meeting with Obama in Seoul, urging the US to lift its export restraints and give Chinese companies a fair competition environment in the US market.
The Whyte-Barnett Solution is designed as a presidential strategy agreement.
Hu is scheduled to visit the US next year.
Additional repostings of this article:
- NationalPublicRadio (US)
- USAToday
- IndiaTimes (which thereupon also reposted this very post!)
- IndiaVision
- DailyIndia
- NewsTrackIndia
- OneIndiaNews
- Asian News International
- South Asia News
- SifyNews
Reader Comments (5)
Dr. Barnett
Nice article, in that I like your new vehicle and the fact that China Daily is covering it. I have a couple of quick questions which make me wonder if I misunderstood something.
1 Article says $ up 40%, RMN up 21%, didn't help the trade deficit. But isn't this decrease in RMB relative to the dollar what exactly what drives the cheap yuan myth? That is, nobody would expect a 21% rise in the RMB to decrease the trade deficit if the $ appreciated 40% over the same period, would they?
2 The whole 25% unemployment paragraph sounds a bit apocalyptic for someone associated with you - am I reading too much into it here?
If John said that, he misspoke. Dollar decreased in value about 40% 2001-2005 against Euro, while RMB appreciated 20%, and our trade deficit got a lot larger over the time period, proving it's not the exchange rate itself that is "causing" anything. Real problem is the way China sterilized the inflow of capital--as the experts note.
US unemployment is officially 10% roughly, with several states (Puerto Rico, Nevada, Michigan, California, Florida, Rhode Island, South Carolina, Oregon, Kentucky) above that mark. If you factor in those who've given up seeking employment (http://articles.moneycentral.msn.com/learn-how-to-invest/The-real-unemployment-rate.aspx) it's more like 16-17%. Underemployment is also an issue, meaning people holding 2-3 part-time jobs and not making a real living. I think if you add it all up, you'd find that 3 out of 4 Americans feel like they've got full employment and 1/4 feel left out.
But when John talks here, he's positing future municipal and state bond failures, which seem fantastic until you look at Greece and Ireland and realize how many countries are working to insulate themselves against a further weakened dollar.
Our big safety valve has been the notion of deflating our debt away, but that is one risky business.
John is consistently darker than I am regarding economics, but so is Nouriel Roubini and Niall Ferguson. Anyway, working with me doesn't require my ability to censor your remarks.
Where can we get a copy of the strategy proposal?
I will post a final draft here on the 20th of December, in conjunction with a WPR column.
Thank you. I look forward to it.