The presidential primaries are in full swing and that means one thing: It is a great time to bash China. Here is a primer on the key U.S.-China relations issues of trade, the South China Seas and climate change; what the candidates are saying; and the reality, which is often far more nuanced than the candidates let on.
Wang Zhao | AFP | Getty Images
Chinese honor guards outside the Great Hall of the People in Beijing.
Trade and market access
The issue: China should play by international rules on market access, trade and currency and not "take" U.S. jobs.
What the candidates say: China and international trade are ugly phrases in a populist year. Hillary Clinton, an architect of the Trans-Pacific Partnership, now opposes it. She rails against unfair currency manipulation. Bernie Sanders decries China's economic and trade practices as taking away from U.S. workers to line the pockets of wealthy global corporations. Donald Trump wants to label China a currency manipulator and promises to bring back 'tens of millions of jobs" lost to China. John Kasich has called for China to stop manipulating its currency, while Ted Cruz is focusing on eliminating taxes on exports to better compete with China.
The reality: China has made progress in opening up its markets to U.S. goods, but slowly. The trade deficit with China reached $365 billion last year. This is primarily due to Chinese saving more than Americans and the types of goods the U.S. sells to China (capital goods such as airplanes and communications equipment) versus what China sells to the U.S. (which include low value electronics, furniture and clothing).
China's impact on U.S. jobs is real but not what the candidates say; it is estimated that only 20 percent of the jobs lost in manufacturing in the 2000s were due to Chinese competition, with the rest from technology change and other factors. In fact, Germany has a per capita trade deficit with the U.S. that is three times higher than that of China. The hard truth is that most of the manufacturing jobs lost in the U.S. are not coming back from China or anywhere else. Creating new jobs in growing industries is what is going to matter for the next president.
On the currency side, most economists agree that China's currency is no longer overvalued. In spite of what candidates Clinton, Sanders and Trump say for sound bites, the U.S. dollar has actually depreciated against the Chinese yuan by approximately 25 percent over the past decade, bringing the currencies back into fairer value. China must manage its currency because it is not floating. Calls to end manipulation miss the point — it is how China is manipulating its currency that matters.
So is China blameless? Hardly. China uses a wide view of what it considers national security priorities to limit or block foreign participation in various sectors where the U.S. is particularly strong, including financial services, education and media. It only recently opened up e-commerce to full foreign ownership and still manipulates grains and cereals through tariffs and direct payments to farmers. There is still room for improvement, but by and large China is not causing the stagnation in wages and lack of new opportunity being felt by less educated workers in the United States.
South China Seas
The issue: China is claiming what most countries consider international waters as its own in the South China Seas. The area has significant natural resources of more than 10 billion barrels of oil and more than $5 trillion in trade passes through the region each year. China is building man-made islands with aircraft runways in what the U.S. considers international waters.
What the candidates say: The candidates have not offered much in the way of actions. Trump recently stated China is building a "fortress" in the South China Seas but offered no concrete plans to address this. Cruz calls for an overall military buildup to counter China and Russia. Kasich talks about showing the flag of the U.S. Navy. Clinton is very familiar with the issue from her time as Secretary of State and has made strong statements pushing for freedom of navigation and not violating international law. Sanders supports an overall deterrence to China's military build up.
The reality: China is flexing its revitalized military muscles and has reclaimed almost 3,000 acres of land in the South China Seas. It is using an ancient claim to the so called "nine dash line" to justify its activities. The PRC is building landing strips capable of supporting military aircraft. Japan, the Philippines and Vietnam are just a few of the countries that view the activities as provocative and are increasing military budgets as a result. It is unclear if China will agree to an international framework governing the dispute or forge ahead with its claim of uncontested sovereignty in the area.
The candidates have offered little insight or guidance to how they would truly act regarding the South China Seas. This is a critical miss as the South China Seas will be one of the most important diplomatic and military challenges between the U.S. and China for the next president. Expect positions to be sharpened and more detail to be disclosed as we move out of the primaries into the full election.
Climate change
The issue: China and the U.S. are two of the biggest emitters of greenhouse gases. Each agreed to the historic Paris Agreement on climate change to take actions to limit global temperature rise to 1.5 degrees Celsius. The countries recently confirmed that they will sign the accord on April 22.
What the candidates say: Sanders believes the Paris Accord is a step in the right direction but does not go far enough. Clinton plans to push full on to enact the Paris Accord as is. The Republican candidates, predictably, want to scrap the Paris Agreement.
The reality: The Paris Accord is an important step to fight climate change and it will not work without the U.S. and China. This is one area where Washington and Beijing are currently in agreement and appear to be on track to work closely together. A poll conducted just after the announcement of the accord showed more than half of Republicans supporting action to fight climate change, but it remains to be seen if candidates Cruz, Trump and Kasich would change their minds and support action if they were to become president.
In an election year, many foreign affairs issues get drowned out. Cybersecurity, North Korea, Taiwan, human rights, and intellectual property protections are all important topics in U.S.-China relations that have barely made the press. They probably will not as they are less sexy than trade, the South China Seas and climate change.
China is an easy scapegoat in an election year for candidates looking to win points with a disaffected electorate. Trade, the South China Seas and climate change are all critical issues in our relations with The Middle Kingdom. Expect strong anti-China rhetoric in the run up to November, but keep an eye on the reality of each issue and what each candidate offers in terms of concrete plans going forward.
Commentary by Ed Sappin, CEO of Sappin Global Strategies, a strategy and investment firm dedicated to the innovation economy. Follow him on Twitter @esappin .
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