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China Wins Over Washington, but D.C. Proves a Bit Tougher

There is a cultural component. "In the Pacific Northwest we have a greater appreciation of the importance of trade with Asian countries because we have large Asian populations," said Gary Locke, a Chinese-American who until last year was Washington's governor. Yet while the disparate receptions awarded Mr. Hu would appear to indicate a deep divide in the United States' approach to China, the breach, in fact, might not be so deep: never mind the talk, nobody really wants to rock the boat. The administration has non-economic reasons to stay on good terms with China, a crucial player in dealing with the nuclear threats from Iran and North Korea, among other things. But equally important, the United States' growing economic ties to China have produced big winners across the country. For all the angst over the trade deficit and the fighting words in the capital about forcing China to change its economic policies and respect human rights, these winners will work hard to maintain the status quo. Gary Clyde Hufbauer, a senior fellow at the Institute for International Economics in Washington who was a trade official in the Carter administration, counts more than 30 significant bills concerning Chinese trade practices proposed in Congress over the past three years. Still, he says, "there are concentrated beneficiaries who will keep temperatures from erupting." Mainstream economists say that trade with China generates net benefits for the United States, like lower prices for consumers. But a coarser tally of winning and losing interests is what determines the nation's China policy. Broadly speaking, the losers are American-based manufacturers and their workers, who are undercut by China's cheap labor. Those manufacturers have relatively little economic clout, however, generating only a tenth of the nation's jobs. And they are no match for the interests on the other side of the ledger: Wall Street banks who want to set up shop in China; American companies with investments in China; firms that rely on Chinese suppliers; Wal-Mart. And this list doesn't even take into account arguably the biggest beneficiary of them all: the United States Treasury. At the end of February, China owned $265 billion worth of American Treasury bonds. If China were to begin a fire sale of these and other American securities — perhaps as part of a policy to loosen the yuan's peg to the dollar — American interest rates could increase significantly, delivering a powerful blow to the housing market and consumer spending. "If you raise interest rates by 150 to 200 basis points on the long end I don't see how the Republicans could win an election," Mr. Hufbauer said. Even as President Bush warns China not to hoard energy resources and senators advise China to let its currency loose, Mr. Hu can probably trust that the approach taken in the Washington on the West Coast will carry the day. And in the Washington on the West Coast, measures like trade sanctions are a no-no. "That would be seen as a confrontation; it would be hugely damaging to the relationship," Ms. Gregoire said. "We understand that much of what you can do with China is built on relationships." Joseph Kahn contributed reporting for this article.