In 2017, the world’s two largest economies, the United States and China, will enter a new phase of their relationship. Both countries are primed and actively exploring avenues for change — in polar-opposite directions.
China, under the leadership of President Xi Jinping, is increasingly focused on fealty, centralized control and restrictions on dissent. There is even speculation that he may extend his leadership beyond the standard retirement age of 67 and not step down in 2022.
Meanwhile, the U.S. is on the cusp of shifting its political leadership to President-elect Donald Trump, who ran for office as a populist, frequently bashing China. He promised to shift manufacturing from China to the U.S., and his tools range from punitive tariffs on imports to incentivizing lower corporate tax rates in the U.S.
On the surface, these nations’ divergent agendas seem to offer little common ground. But it’s possible they set the stage for unprecedented compromise.
If my recent interview by China’s Xinhau News Agency is any indication, the questions on the forefront of Chinese business leaders’ minds are, to put it politely, China-centric: Why do American companies use a strategy of shutting down Chinese competitors with patent claims? Why are American companies copying Chinese innovation?
This attitude is why, among other things, China is raising higher regulatory walls for foreign business.
Rather than blocking Chinese access to our markets, Trump should insist on parity in our economic relationships. Americans cannot do business in China without a majority-Chinese partner, nor can Americans easily buy real estate in China, yet Chinese citizens are buying tens of thousands of American properties using billions of dollars in cash.
Requiring parity in our economic relationships will level the playing field between our countries. More, we can effectively counterbalance China’s influence by exerting leadership in Asia and completing the Trans-Pacific Partnership agreement.
China is too important a trading partner to simply be penalized with mercantile tariffs, burdening great American companies, such as Apple, Wal-Mart, Best Buy and Microsoft.
A senior Chinese official told me that Beijing thinks they get only about 2 percent of the value in manufacturing every Apple product, compared with the benefit that Apple and its shareholders receive. Ironically, the Chinese government created this situation, using subsidies to attract U.S. companies to their Chinese partners, which makes business there doable.
The Chinese aspire to shift away from being the world’s manufacturer and desire to become the world’s innovator. That’s why their schools turn out millions of engineers every year, and they have more than 300,000 students in U.S. schools so they learn not only the latest textbook knowledge, but also absorb our culture and that special spark that makes Americans question the status quo and innovate.
What the Chinese leaders miss is that by encouraging domestic conformity, blocking dissent and restricting access to the internet and to companies such as Facebook and Google, they are restricting the very freedoms that encourage innovation.
Given what Trump wrote in “Think Big” and “The Art of the Deal,” he may put everything on the table and come to an understanding, and even a deal, with the Chinese leadership. It could even be a deal that reconciles American’s grievances with China; namely, Beijing’s mixed record on World Trade Organization commitments, disregard for intellectual-property rights and discriminatory innovation policies that restrict the very freedoms that encourage innovation.
In any case, the relationship between these two mega-countries will change. The question is, what will be the tone and the level of discourse?
We must be careful, as the African proverb warns: “When elephants fight, the grass gets trampled.” Trump may bellow, and the Chinese may threaten and even provoke, but ultimately a deal is in both nations’ interests.
Gary Shapiro is president and CEO of the Consumer Technology Association, the U.S. trade association representing more than 2,200 consumer technology companies, and author of the New York Times best-selling books, Ninja Innovation: The Ten Killer Strategies of the World’s Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own.
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