Thursday, July 14, 2005

When Congress Demonizes China, Free Enterprise Suffers

Pacific News Service, Commentary, George Koo, Posted: Jul 14, 2005

Editor's Note: If alarm in Washington over a Chinese company's bid to buy Unocal gets out of control, the U.S. economy itself could be harmed.

SAN JOSE, Calif.--When it comes to relations with China, U.S. leaders' reactions can become so knee-jerk. Alarm over the Unocal tender offer and over China's supposed military might are two latest examples of China bashing.

The United States has 24 aircraft carriers deployed around the world; China has none. In terms of total tonnage of all warships, the United States has nearly 11 times that of China.

The U.S. Navy's blue-water capability reaches clear across the Pacific to China's continental shelf. But Secretary Rumsfeld finds alarming China's heightened investment in naval and other military power, still at levels far below that of the United States.

When British Petroleum acquired Amoco, a much larger company with far greater oil reserves than Unocal, no one raised hackles over national security. China National Offshore Oil (CNOOC) makes a bid to acquire Unocal and members of Congress go berserk over the perceived threat to our national security.

If their tender is successful, CNOOC plans to divest Unocal's U.S. holdings and thus protect the American-based jobs. If Chevron's bid for Unocal is successful, for sure there will be consolidation of the two companies and redundant jobs eliminated.

Apparently, perceived threat stemming from a normal Wall Street transaction trumps Congressional concerns about job preservation.

Why is China being treated as another pariah state? China has invaded no Kuwait (as has Iraq), held no American hostage (Iran), nor pretended to threaten neighbors with nuclear weapons (N. Korea).

Since Sept. 11, 2001, America found a real enemy in fighting terrorism -- and beyond that by creating the "axis of evil." The United States even made China a partner by delegating the North Korea crisis to China's stewardship.

Then the Bush Administration grumbles that the Chinese are making no progress with North Korea, conveniently overlooking the intemperate remarks by Dick Cheney and James Bolton on North Korea that torpedoed discussions at critical junctures.

In Singapore, Rumsfeld's June 4th speech accusing China of military ambitions was greeted with deafening silence. China's neighbors, including Australia, heretofore one of America's strongest allies, see China as an important economic partner and not as a potential aggressor per Rumsfeld's description.

It's hard to understand why Rumsfeld is going out of his way to pick a fight with China. The competition for oil may lead to eventual conflict, but the current situation hardly seems so dire as to justify his extreme rhetoric.

Congress is behaving in a similarly irrational way, as if raising the temperature on the bilateral relations with China will take the heat off a host of domestic issues.

A recent survey on American attitudes toward China, commissioned by the Committee of 100, a national group dedicated to advancing Chinese American issues and politically empowering the community, found Congressional staff twice as hostile toward China as the American public. Among the Congressional staffers who profess expertise on China affairs, less than 5 percent could correctly identify Hu Jintao as the current leader of China -- an indication of how out of touch with reality Congress can be.

Hopefully Congress will not get carried away in demonizing China to the point of doing irreparable harm to our free enterprise system.

Some argued that since China will not let American companies take over Chinese companies, we are justified in refusing Chinese companies to do the reverse. This is specious reasoning. So long as China applies their regulation evenly to all investors, they are playing by the rules.

By contriving to prevent CNOOC from tendering their offer, Congress is telling the world that dollars in British hands are legal tender, but not when in Chinese hands.

Imagine the havoc such actions will wreak on Wall Street, as foreign investors begin to realize that American policy is not just arbitrary when it comes to finding weapons of mass destruction but also on rules of investment. America would no longer serve as the safe haven they once sought.

If the world were to decide it no longer wished to support the U.S. national debt by holding onto dollars (and treasury bills), the consequences would be too gruesome to contemplate. We would have only the irrational behavior of our leaders to blame.

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