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CNN Saturday Morning News
Will U.S.-China Conflict Damage Economic Ties?
Aired April 14, 2001 - 09:10 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: Well, the fallout of the diplomatic clash with Beijing has corporate America holding its breath and wondering about possible damage to economic ties to China.
Nicholas Lardy from the Brookings Institute is here to talk about the dollars-and-cents future of China and the U.S.
Good to see you, Nicholas.
NICHOLAS LARDY, BROOKINGS INSTITUTION: Good morning.
O'BRIEN: Well, do you agree that a lot is definitely at stake here for the Chinese?
LARDY: Oh, absolutely. The United States is China's number one trading partner, and essential to their strategy of opening up to the outside world. Their economy depends much more on trade than it did a decade or two ago.
PHILLIPS: Put it in perspective. Let's talk about the biggest imports from China, also China, one of the U.S.'s largest markets for exports.
LARDY: Well, yes, the United States does export over $20 billion worth of goods to China every year, its airplanes, telecommunications equipment, computers, generally high technology goods, capital goods that are going into investment programs in China. And they do depend to some extent on the technology that is embodied in those U.S.- produced goods.
The flow the other way is primarily labor-intensive commodities, footwear, toys, sporting goods, and apparel are the biggest items that we are importing from China.
PHILLIPS: So looking at the situation that is happened, do you think China is poised to lower trade barriers and enter the World Trade Organization?
LARDY: Well, it's been a long saga. They've been at this more than a decade, and are negotiating to come into the World Trade Organization, and there's still a number of important issues that remain to be settled. But they are still, even while the negotiations are going on, they're steadily lowering their tariffs, reducing a variety of other kinds of non-tariff barriers. So they are unilaterally opening up their economy in preparation for eventually concluding the negotiations and coming into the world system and being committed to the rules of the international trading system.
PHILLIPS: Would there be any negatives to think about?
LARDY: Well, the regime is very much worried about negatives domestically. As they open up, they're going to have a lot of increased competition, both in manufacturing and particularly in agriculture, in their grain-producing sector. They're going to import a lot more grain from the United States and other big producers, and this is going to put downward pressure on prices in China, and farmers will bear the -- a very substantial burden in China in terms of lower, lower prices for their products and presumably thus lower income, at least for some of them.
PHILLIPS: Nicholas, before we let you go, let's talk about corporate America, just quickly here. I know blue chip U.S. companies, I was reading, like General Motors and Motorola, have already made big bets on China with the last 20 years invested more than $25 billion, I was reading.
Now, what do you think will happen with regard to companies like this, the feeling about their investment and maybe was this a good idea, a bad idea, could it affect the companies?
LARDY: Well, most of them enter this kind of a complex, difficult market with a very long-term view. They will -- they obviously want to have a stable political relationship, but they are prepared for ups and downs. They lived through the Belgrade bombing and the aftermath, which was much, much more severe. A lot of American property was destroyed in China. There were some boycotts of U.S. goods. Of course, our embassy was damaged in Beijing.
This time around, the government kept things a little bit more under control, and I have not read or heard or any damage to U.S. property, U.S. installations in China this time around.
For the most part, it was business as usual. Of course, if there had not been a settlement, it could have deteriorated, and significantly affected corporate interests.
PHILLIPS: Yes, no doubt American businesses want to put this whole incident in the rear-view mirror.
LARDY: Absolutely.
PHILLIPS: Nicholas Lardy with the Brookings Institution, thank you, sir, for your insight.
LARDY: Thank you.
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