The next US President must be more matter of fact, and his policy focus must be China
On both Wednesday and Thursday, the 
price of oil briefly hit $100 a barrel. The new record made headlines, as well it should have. But what does it mean, aside from the obvious point that the economy is under extra pressure? Well, one thing it means is that we’re having the wrong discussion about foreign policy.
Almost all foreign policy talk in this presidential campaign has been motivated, one way or another, by 9/11 and the war in Iraq. Yet it’s a very good bet that the biggest foreign policy issues for the next president will involve the Far East rather than the Middle East. In particular, the crucial questions are likely to involve the consequences of China’s economic growth.
Start with the soaring price of oil, which wasn’t caused by events in the Middle East that disrupted world oil supply. Instead, it had its roots in Asia. It’s true that the global supply of oil has been growing sluggishly. But the reason oil supply hasn’t been able to keep up with demand is surging oil consumption in newly industrialising economies – above all, in China.
Even now, China accounts for about only 9% of the world’s demand for oil. But because China’s oil demand has been rising along with its economy, in recent years, China has been responsible for about a third of growth in world oil consumption. Hence, oil at $100 a barrel is, largely, a made-in-China phenomenon.
That brings us to a second issue. There’s growing concern in US about the effects of globalisation on wages, largely because imports of manufactured goods from low-wage countries have doubled as a share of GDP since 1993. US industrial imports from China went from less than 0.5% of GDP in 1993 to over 2% in 2006. Last, but most important, is the issue of climate change, which will eventually be recognised as the most crucial problem facing US & the world.
Why is climate change a China issue? Well, China is already, by some estimates, the world’s largest emitter of greenhouse gases. And as with oil demand, China plays a disproportionate role in emissions growth. In fact, between 2000 & 2005, China accounted for over half the increase in the world’s emissions of CO2. Indeed, back in 2001, when he reneged on his campaign promise to limit greenhouse gas emissions, President Bush cited that the Kyoto treaty didn’t include China & India as an excuse for doing nothing. But the real problem is how to make China part of the solution. So what does all this tell us about the presidential race?
On the Republican side, foreign policy talk is all bluster & braggadocio. To listen to them, you’d think it was still February 2003, when national discourse was dominated by people who thought US military might was sufficient to shock & awe the rest of the world into doing our bidding. Memo: China has 50 times the population of Iraq.
The Democrats in general make far more sense. But among at least some Barack Obama’s supporters seem to believe that if he is elected, the world’s problems will melt away in the face of his multicultural charisma.
Memo: It won’t work on the Chinese.
The truth is that China is too big to be bullied, and the Chinese are too cynical to be charmed. But while they are our competitors in important respects, they’re not our enemies, and they can be dealt with. A lot of Americans, when they think about the next president, seem to be looking for a hero – who will stand tall against terrorists, or transform the world with his optimism. But they should look for something more prosaic – a good negotiator, someone who can bargain effectively with some very tough customers and get the deals we need on energy, currency policy and carbon credits.
price of oil briefly hit $100 a barrel. The new record made headlines, as well it should have. But what does it mean, aside from the obvious point that the economy is under extra pressure? Well, one thing it means is that we’re having the wrong discussion about foreign policy.Almost all foreign policy talk in this presidential campaign has been motivated, one way or another, by 9/11 and the war in Iraq. Yet it’s a very good bet that the biggest foreign policy issues for the next president will involve the Far East rather than the Middle East. In particular, the crucial questions are likely to involve the consequences of China’s economic growth.
Start with the soaring price of oil, which wasn’t caused by events in the Middle East that disrupted world oil supply. Instead, it had its roots in Asia. It’s true that the global supply of oil has been growing sluggishly. But the reason oil supply hasn’t been able to keep up with demand is surging oil consumption in newly industrialising economies – above all, in China.
Even now, China accounts for about only 9% of the world’s demand for oil. But because China’s oil demand has been rising along with its economy, in recent years, China has been responsible for about a third of growth in world oil consumption. Hence, oil at $100 a barrel is, largely, a made-in-China phenomenon.
That brings us to a second issue. There’s growing concern in US about the effects of globalisation on wages, largely because imports of manufactured goods from low-wage countries have doubled as a share of GDP since 1993. US industrial imports from China went from less than 0.5% of GDP in 1993 to over 2% in 2006. Last, but most important, is the issue of climate change, which will eventually be recognised as the most crucial problem facing US & the world.
Why is climate change a China issue? Well, China is already, by some estimates, the world’s largest emitter of greenhouse gases. And as with oil demand, China plays a disproportionate role in emissions growth. In fact, between 2000 & 2005, China accounted for over half the increase in the world’s emissions of CO2. Indeed, back in 2001, when he reneged on his campaign promise to limit greenhouse gas emissions, President Bush cited that the Kyoto treaty didn’t include China & India as an excuse for doing nothing. But the real problem is how to make China part of the solution. So what does all this tell us about the presidential race?
On the Republican side, foreign policy talk is all bluster & braggadocio. To listen to them, you’d think it was still February 2003, when national discourse was dominated by people who thought US military might was sufficient to shock & awe the rest of the world into doing our bidding. Memo: China has 50 times the population of Iraq.
The Democrats in general make far more sense. But among at least some Barack Obama’s supporters seem to believe that if he is elected, the world’s problems will melt away in the face of his multicultural charisma.
Memo: It won’t work on the Chinese.
The truth is that China is too big to be bullied, and the Chinese are too cynical to be charmed. But while they are our competitors in important respects, they’re not our enemies, and they can be dealt with. A lot of Americans, when they think about the next president, seem to be looking for a hero – who will stand tall against terrorists, or transform the world with his optimism. But they should look for something more prosaic – a good negotiator, someone who can bargain effectively with some very tough customers and get the deals we need on energy, currency policy and carbon credits.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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