China's G-20 Opportunity

President Obama and other world leaders meet in Toronto for this weekend’s G-20 summit amid a challenging period for global markets.

U.S. unemployment still hovers around 10 percent. Trade deficits are widening. While the success of the summit’s proceedings will be based on many factors, collaboration and agreement on top-of-mind economic issues rank among the most important.

Nowhere is this more relevant than U.S. trade relations with China, already close to eclipsing Japan as the second largest economy.

Today, China is the world’s largest recipient of direct foreign investment, with 480 of the Fortune 500 companies doing business there. U.S. exports to China were nearly $70 billion last year alone, or four times what they were a decade ago.

Earlier this month, I testified before the House Ways and Means Committee on the need for open market access in light of Beijing’s recent “indigenous innovation” policies that have jeopardized the vitality of foreign companies whose operations have helped develop and build up the Chinese economy.

Beijing has sent shockwaves across the global economy in the last few months by issuing a series of guidelines intended to favor products with China-based intellectual property — while requiring foreign companies to disclose their IP.

Getting the trade calculus right at the G20 will require a recalibration of these types of vague and punitive rules that unfairly tip the scales and threaten to disrupt the free flow of commerce essential to growth across our respective economies.

In Toronto this weekend, G20 participants must build on the recent U.S.-China Strategic and Economic Dialogue by pursuing three interlocking objectives.

First, holding China accountable to its international commitments. If China builds its own island in a sea of globally accepted commercial standards and practices, this sets a dangerous precedent for future growth and innovation.

Consider a hypothetical but relevant example of the economic implications of an “indigenous innovation” policy. The BlackBerry smart phone, which generated 10.5 million shipments last quarter alone, was developed by the Canadian company Research in Motion. Imagine the commotion if Washington made BlackBerry phones illegal or difficult to buy in the United States because they are the intellectual property of a foreign company.

In reality, products invented by U.S.-based companies like Apple, Dell, HP or Microsoft, should not be put at a disadvantage in China now or in the future.

While China has been in the World Trade Organization for nearly 10 years, it has still not signed the Government Procurement Agreement, which enables greater collaboration among governments on commercial issues.

If China completed the GPA accession process and committed to a date-certain to sign the agreement, Beijing then sends a signal that it is prepared to live up to its responsibilities as a global leader.

Second, G-20 participants have an opportunity to endorse the need for greater predictability in trade with China. While China’s recent commitment to hold bilateral innovation discussions and pursue revised policies is a positive first step, the notion of fair and predictable trade has been a cornerstone of U.S. industry’s ability to sell into foreign markets for more than 150 years.

Within the context of 10 percent unemployment and limited capital for new ideas and innovation, predictability in global commerce is as important to Washington as it ever has been.

Hundreds of thousands of American jobs, including many in the high-tech sector, are directly tied to predictable and robust business with China.

Third, Washington can set its own economic example. This begins with emphasizing the importance of private-public solutions — including our commitment to science, technology, engineering and math (STEM) education; implementing tax policies that help research and development, and moving to a clean energy economy, based on IT-driven technologies like smart grids.

More broadly, whether related to cybersecurity, protecting intellectual property or encouraging globally accepted standards, it is critical to Washington’s long-term competitiveness that we continue to be a pace setter by adopting policies that discourage others from going their own way with regard to country-specific solutions.

With China, there are barriers to overcome and little room for error.

Let’s hope the diplomacy demonstrated at the G-20 ignites a movement to get back on track.

Public Policy Tags: Trade & Investment

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