A First for the Chinese in a Complex World of Trade

Commerce Department figures for June show that for the first time in two decades Japan no longer runs the biggest trade surplus with the United States. That distinction now belongs to China, whose economy over those same two decades has boasted the world’s fastest rate of growth. But caution is in order in looking at the trade numbers: China’s vault into the top spot may have less to do with the growth of its exports than with the decline in Japan’s.

Japan’s trade surplus fell from $5.34 billion in June 1995 to $3.24 billion this year, largely as a result of declining U.S. demand brought on by earlier rises in the value of the yen. China’s surplus in the same period rose from $3.01 billion to $3.33 billion. Whether the June rankings mark the onset of a lasting shift is certainly arguable. For now, the significance of the trade figures should be seen as more political than economic, once again giving prominence in this election season to Washington’s continuing trade grievances with China.

Commerce Secretary Mickey Kantor, who as President Clinton’s trade representative went round and round many times with both Japan and China, used the new figures to again criticize China for unfairly keeping American products out of its markets, even as it busily continues pirating such U.S. intellectual properties as computer software and compact disks.

Kantor’s complaint was somewhat surprising since the Clinton administration had seemed to be seeking at least a temporary detente with China on such contentious issues as trade and human rights abuses. Kantor’s main aim could have been to try to preempt an aggressive Republican response on the trade deficit with China and blunt any charge that the administration is being too soft on Beijing.

But even if that’s the case, his charges remain valid. Intellectual piracy does go on, though China isn’t unique in tolerating it; Taiwan, for one, remains on the U.S. watch list of countries where such theft has been widespread. And China does practice market protectionism on a considerable scale, though whether more than other countries at a similar level of development is hard to say.

It’s worth recalling that Japan, a highly advanced as well as a democratic nation, has had bitter trade disputes with the United States since the 1960s. That’s not to minimize the seriousness of the issue with China but to note that it’s not only with authoritarian countries that major American trade differences may exist.

Trade with China remains one means for enlarging its useful involvement with the world and fueling the growth of its middle class, essential steps on the path to promote greater political liberalization and internal stability. In the long run, those goals largely define the American interest in China.