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How we get past our China 'identity crisis'

When it comes to dealing with China, the United States has experienced nothing short of an identity crisis: from big stick diplomacy, to use of (at times) a bigger carrot, to somewhere in the middle. The twenty-one gun salute slated to greet President Hu Jintao upon his arrival in Washington this week should serve as a wake-up call for U.S. policymakers. Indeed, Paul Revere’s words of warning from 1775 seem apt. China is coming, and as was the case with Great Britain, it’s now up to the U.S. to develop a well thought-out plan.

Considering recent economic events, this is arguably for good reason. As U.S. prospects for growth remain sluggish, China quickly recovered from the global recession and is experiencing meteoric 9.3 percent growth. It recently passed Japan and is now the world’s second largest economy, is the third largest holder of foreign debt reserves, is leading the way in developing trade relationships with emerging markets in Asia, Africa, and Latin America. China is also leading the world in investing in alternative energy and nano-sensory diagnostics, while securing the rare-earth materials necessary to develop innovative technologies of the future.

For President Obama, emerging with a clear set of deliverables focused on job creation, increased competitiveness and trade accountability will ultimately determine the success (or failure) of this week’s visit.

First, prior to Mr. Hu’s arrival, Mr. Obama should signal a call to get his own house in order and focus on two fundamental growth areas: early childhood science, technology, engineering and mathematics (STEM) education and the creation of a level-laying field for U.S. companies already competing against Chinese counterparts.

Just last month, the Paris-based Organization for Economic Cooperation & Development (OECD) released a 34-country comparison of 15-year-olds’ strength in science, math and reading. China’s Shanghai topped all three categories, in large part due to a more holistic and consistent approach to high-performance education. The message: China is winning, the U.S. is losing and if we don’t invest in the fundamentals now, the next Apple, Facebook or Google will undoubtedly be based in Shanghai or Beijing.

Equally important, we must come to terms with the fact that we live in an increasingly globally competitive world, but that competition is not zero-sum. The reality is that U.S.-based companies must maintain cost structures (inclusive of taxes) that are comparable to foreign competitors and build facilities in close proximity to their biggest customers. Thus, to effectively compete with China we must work and sell within China. China’s growth creates new market opportunities for U.S. companies who through working in China create new exports and hence new jobs here in the U.S. Closing our door to China or castigating companies who do business there is against our best self-interests.

Second, it’s time we engage with China from a clear position of strength. Far too often, China seems to be an inverse mirror that when looked at reflects back our own innovation inadequacies. This shouldn’t be. We have real work to do, but the United States is still home to the world’s best universities and the best entrepreneurs, which is a solid foundation on which to build. Further, the U.S.’ economy is more than twice the size of China and we have the technologies and innovation that China needs to continue its growth.

Finally, we must hold China accountable on the world stage. In short, it cannot be allowed to claim first world status when it suits its’ own purposes, but take cover under a third world cloak when convenient. For example, China’s rightful interest in driving ‘indigenous innovation’ should not be allowed to morph into industrial policies that forecloses foreign companies from wide swaths of the Chinese economy. U.S. businesses and policymakers must work side by side with international partners to ensure that China’s growth is fairly and responsibly achieved.

All things being equal, this week’s Obama-Hu meeting could ultimately be just another chapter in a long, complex and unpredictable narrative. However, this doesn’t need to be the case. If Mr. Obama isolates what truly matters to our economic recovery, a new formula of tough love and proven policy achievements could be the catalyst to help the U.S. move beyond the identity crisis approach of years past.

Otherwise, it’s just another missed opportunity at a time when America can hardly afford one.

Dean Garfield is president and CEO of the Information Technology Industry Council.

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