Global Interdependence Explored
The Far East and The West have deeply intertwined economies. Electronic communication happens in a very small world. We know almost immediately what happens among trading partners and in the global stock markets. To quote a Phillippine blogger, Ceilito Habito,
It is often said that when the US economy sneezes, Asia – and much of the world, for that matter – catches a cold. And the reason for this is that as the biggest economy in the world, the US tends to be at or the near the top of many countries’ list of biggest trading and investment partners.
Biggest sneeze in 5 years - Yesterday the U.S. stock market took the biggest plunge in five years. The Financial Times called it a " ‘Wake-up call’ for investors." Reporters Michael Mackenzie and Saskia Scholtes in New York and Paul J Davies in London authored the July 27 2007 story from which I quote,
Wall Street closed lower on Friday after a tumultuous week in which the S&P 500 index experienced its worst performance since September 2002 as heightened credit market concerns battered stocks.
London saw all this year’s gains wiped out. There were also heavy falls in Asian stock markets, European stocks were lower and corporate debt markets saw further sell-offs.
Chinese currency unhealthy? Treasury Secretary Henry Paulson will be visiting China next week to talk about economic issues and also about global warming (excuse me - "climate change.") And, as usual, the current Republican administration does not want Congress to stick its nose into what it thinks is Bush's business. According to the The Washington Post, "U.S. lawmakers have grown increasingly unhappy as America's trade deficit with China has soared, hitting $233 billion last year, the largest ever recorded with a single country and one-third of the U.S. total deficit with the rest of the world." In a related story, "The Senate Finance Committee voted 20-1 on Thursday to give the U.S. government new tools to press China to raise the value of its currency, but the Bush administration said it opposed the bill." Of course China has its own ideas about the currency question, posting this story: "US Treasury opposes currency bill" (China Daily) 2007-07-28. To quote,
The US Treasury Department said it continues to believe that the robust Strategic Economic Dialogue (SED) is the best means of achieving progress, when opposing a bill aimed at pressing China to raise the value of its currency.
. . . The overwhelming vote shows Congress is headed toward passing legislation by a big enough margin to overcome any presidential veto, said Senator Charles Schumer, a New York Democrat who helped craft the measure.
. . . Meanwhile, China has made it clear on many occasions that the country would carry out the exchange rate reform in an independent, controllable and gradual way to maintain the yuan's strength.
What about imported food safety? It will take us a long time to get over this stomach ache. Our pets got sick and died, our teeth were jeopardized, and we were forced to back off seafood consumption. This is what China says it is doing about the problems. ChinaDaily (7/28/07) headlined, "China issues new regulation* on food safety." Quoting the story,
China has faced a barrage of international criticism over the state of its food industry in the first six months of the year following a series of scandals.
Japan, Singapore, Australia and other countries sent back millions of toothpaste tubes and Canada halted imports from China.
During the cold season, it is good to wash your hands often. It is useful to remember to take precautions when going out and about with strangers. China and the U.S. have long been strangers. And for far too long China and the United States have taken the status quo for granted. The Chicago Tribune's China Bureau Chief, Evan Osnos integrates all of the above questions into a very useful article titled, "Safety of Imports Tests Trade Partners" (7/20/07). To quote from it,
. . . China and the U.S. share a delicate challenge: how to respond to consumer demands for tougher import protections without letting a tit-for-tat dispute undermine one of the world's most robust trade relationships.
. . . U.S. trade with China topped $343 billion last year, ranking it as the second-largest American trade partner, behind Canada. China's vast reserves of U.S. Treasury bonds have also helped the U.S. government fund its budget deficits and keep interest rates low.
For China, U.S. trade is no less indispensable. More of China's $1 trillion in exported goods went to the U.S. than anywhere else, allowing the Chinese Communist Party to create jobs and shore up domestic support.
The health of the east/west relationship will be put to another test in 2008. People from all over the world will come together in China next year for the Summer Olympics. It is an open question what effect this will have. Several questions loom over the event. CNN.com highlights just one of those questions in this recent story, "Human rights questions remain for China."
With a year to go before the 2008 Olympics get under way, questions linger over China's efforts to improve its human rights record.
Observers and pressure groups have criticized the efforts of the Chinese government and the International Olympic Committee (IOC) since Beijing won the bid in 2001, rejecting assertions by both that the Games will lead to lasting positive change in the world's most populous nation.
What will the next big sneeze be about? The Far East and the West are now inextricably interdependent. Questions of power, culture, dependence and interdependence need to be explored more fully. We have been financing our incredible national debt via China and other Far East economies. China's governmental system is evolving. Is the direction of the evolution healthy? How can the health of the earth's environment be managed to avert global catastrophe? The questions remain. They will be revisited most Saturdays at this blog. Stay tuned.
- *"New regulations" from ChinaDaily:
The main points are:(Cross-posted at South by Southwest.)
-- Inspection and quarantine authorities, as well as commercial and drug supervisors, should establish positive and negative records for Chinese food exporters and submit the records to the media regularly.
-- Local governments at county level and above are mainly responsible for the supervision of food product safety.
-- Exporters of food products who provide fake quality certificates or evade quality and quarantine inspections will be fined three times the product's value.
New York Times - "China Rises" (Interactive website & video) New York Times - "China Courts Africa" (2006) GlobalIssues.org -"Corporate Social Responsibility Ranking Scale of Countries" (Includes good article. Note: U.S.=18th and China, Hong Kong=20th)