Why the kid-glove treatment for China?

Corporate interests are trumping human interests in President Bush's handling of the spy plane crisis.

Topics: China, George W. Bush,

What a difference a dollar makes, or rather, hundreds of billions of dollars.

The strikingly divergent responses of the American government to diplomatic crises involving first Russia and then China in recent weeks speak volumes about what the Bush administration considers strategically important. If you follow the money, it also suggests that the Bush administration’s handling of China is being driven more by corporate interests than national security.

In the case of Russia, we had the discovery of a Russian spy in the upper echelons of the FBI’s spy-catching apparatus. Robert Hanssen was essentially a relic — a holdover from the old days of the Soviet “Evil Empire.” Despite this, the Bush team responded to his unearthing with a macho Cold War-era shutdown of the Russian Embassy, which was ordered to send home 50 of its staff. This predictably led to a reciprocal order in Moscow for 50 American Embassy personnel to pack their bags. More importantly, the incident, and the aggressive Bush response, has led to a poisoning of relations between the U.S. and Russia, where many people now feel that they are still being punished by America for the actions of a government they overthrew a decade ago.

In the most recent crisis with China, on the other hand, a real challenge has emerged. Whatever the truth about who hit whom, the end result of the fatal midair collision of a U.S. spy plane and a Chinese fighter is that the Chinese have possession of an American air crew and a top-secret American aircraft that, by all accounts, was flying over international waters at the time it was intercepted by Chinese warplanes.

Although China’s treatment of the crew and entry into the plane clearly violate international law and convention, the same Bush team that went ballistic over Russian spying has acted with incredible restraint. Instead of demanding immediate release of the crew and taking the usual steps in such circumstances, the Bush administration has taken a softer stance. Bush has not demanded any deadline for China to release the crew and plane. The administration “requests permission” to see the captured crew, it expresses “regret” about the incident and has made it clear that it hopes the incident won’t lead to problems in the longer-term relationship between the two countries. Beijing could have gotten much stiffer treatment. Bush could have called the Chinese ambassador onto the carpet and chewed him out at the White House, as Chinese officials did to America’s ambassador in Beijing. He could have threatened to cancel military cooperation agreements and instead announce a joint naval exercise with the Japanese or Taiwanese. Even worse, Bush could have threatened to block the Chinese from hosting the 2008 Olympics. He didn’t.

So why the iron fist for Russia and the kid-glove treatment for China?

Behind all the scholarly and diplomatic blather about the need to be sensitive to internal political disputes in China, basically it comes down to money and to the power and influence of American corporate interests in Washington.

With Russia’s economy still in tatters, and with little prospect of a revival any time soon, American investment there is still relatively small. In China, by contrast, American corporations have invested hundreds of billions of dollars. Some, like General Motors, IBM and General Electric, hope to gain a foothold in the Chinese domestic market. Others — indeed the vast majority of U.S. companies — see China as an offshore cheap-labor site where they can build things to sell back into the U.S.

The U.S. Department of Commerce reports that in 1999, U.S. corporate assets in China and Hong Kong were worth $81 billion, and had sales of $66 billion and profits of $3 billion. Indeed, much of the $70 billion U.S. trade deficit with China represents sales by U.S.-owned or partially U.S.-owned manufacturing facilities in China. By contrast, U.S. corporate assets in all of Eastern Europe totaled just $30 billion, and the portion of those assets located in Russia are so small that the Commerce Department doesn’t separate that figure in its annual Survey of Current Business.

The Bush administration doesn’t want to jeopardize the interests of those corporations that are in China. Most of them, like AT&T, AIG, Boeing, Microsoft, General Motors and an industry PAC called Americans for Free International Trade, were major contributors to the Republican Party and the Bush campaign. The irony, of course, is that China needs American investment far more than America needs to invest in China, since China’s aggressive economic development plan is premised on continued and increased foreign corporate investment in China.

Of course, kowtowing to China on behalf of American corporate interests would be nothing new. The Clinton administration pushed successfully to end the annual congressional review of favored trade relations with China — probably the strongest lever the U.S. had to protect human rights there — precisely because American business didn’t want that issue interfering with its efforts to make a buck in the Middle Kingdom.

Yet the history of the most-favored-nation debates shows that the threat to trade and investment is the one thing almost guaranteed to get the attention of Beijing’s ruling elite.

If Bush were to demand return of the American plane and crew on pain of suffering economic sanctions, those airmen and women would be on the next flight home. But that could come with a price tag. American companies competing with European and Japanese firms next time around for contracts in China might then find themselves suddenly losing out on deals they should have won.

That’s why the crew may have to cool their heels in captivity in Hainan for a while, while Chinese intelligence experts comb through their grounded airplane and see how much they can make the Bush team squirm.

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