Letter from Washington
Anniversaries
by John Frisbie
Anniversaries, anniversaries. This year marks the 30th anniversary of China's economic reopening after decades of isolation. The 30th anniversary of US-China diplomatic relations comes at the beginning of 2009. And the US-China Business Council (USCBC) is in its 35th year of providing US companies with the policy leadership and practical business support to successfully develop business with China.
USCBC was founded in 1973. To put that in context, Chairman Mao was still in power, as was Richard Nixon, the president who re-engaged with China after a long impasse. The Soviet Union dominated US foreign policy thinking.
In our office hallway hangs a fascinating photo of the first US business delegation to the PRC—a black-and-white image from 1974 showing a USCBC delegation at a barren-looking Great Wall. The photos on our office walls chronicle our history. We have pictures of US presidents and of China's leadership throughout the years meeting with or speaking to members.
These photos show USCBC's visible involvement in landmark events. But our primary mission has been to provide services that help our member companies build their business with China. It is important to remember that USCBC was set up by companies, for companies. Boeing, Cargill, Hewlett-Packard, and Westinghouse were among the founders, and all are successful in China today.
USCBC remains the leader in providing the information, analysis, advice, best practices, and advocacy necessary to knock down barriers and expand commercial opportunities. If we do these things well, then by extension we are helping both the US and Chinese economies.
We are proud of our role in bringing about tremendous changes in China's business environment. The pervasive restrictions and workarounds that marked the first two decades are now mostly gone.
China's entry into the World Trade Organization (WTO) in 2001 ushered in significant change and was the single most important event for US companies since China began its economic reforms. China's import tariffs were cut almost in half and its extensive import licensing system mostly eliminated. Many closed economic sectors were opened. Gone are the days of "balancing foreign exchange"—the need to generate hard currency—which was the bane of every foreign investment plan. And, though politics still play a role in US-China business relations, WTO entry unquestionably provided an avenue for engagement based on rules and accepted procedures. For the business community, this is historic and vitally important.
Some industries are still greatly restricted and need USCBC's continued work, but on a macro level, the results are clear. In surveys, USCBC members consistently report expanding revenues and profitability.
Looking ahead
Despite significant progress, USCBC has concerns about where things go from here. Addressing the recent trend of more nationalist, and perhaps protectionist, policies in China is at the top of USCBC's agenda. Signs of favoritism show up in several areas—government procurement practices, the setting of product standards, the designation of "pillar industries," and consideration of "national economic security" when evaluating mergers and acquisitions.
At home, concerns about the trade deficit, jobs, and foreign investment also require USCBC's leadership in Washington and beyond to ensure that protectionist sentiment does not result in actions that do more harm than good.
With a new administration coming in, USCBC has been calling for the expansion of engagement with China. The new administration should continue the Strategic Economic Dialogue (SED)—or something like it—to tackle the big issues, such as energy, the environment, consumer safety, financial reforms, and maintaining open investment environments. It should also continue the Joint Commission on Commerce and Trade to deal with specific trade issues. When good faith dialogue fails, the new administration should use available dispute settlement tools, including WTO cases when well-focused and winnable.
There is an opportunity for bigger, bolder ideas, if we can keep building trust and confidence. The broad issues listed above require America's and China's leadership. On all of those issues and more, we face common challenges—and have common interests in reaching the right solutions.
Would China respond favorably to a more ambitious bilateral agenda, or would it prefer to continue the pattern of incremental progress? Good question, and one to which we must find the answer. China typically moves forward cautiously, and the financial market turmoil may not help our ability to encourage them to be bolder.
The US-China economic relationship is the most important relationship for each country going forward. It is a relationship that each of us has to get right if we are to succeed in the years ahead. That is the challenge of the next phase of the relationship—and for USCBC.
John Frisbie is president of the US-China Business Council.
Copyright 2008 US-China Business Council
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