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Stephen Olson at Chinese Development Institute Conference


 Clyde Prestowitz giving presentation to CDI...


Steve Olson teaching trade negotiations at the Mekong Institute...


Stephen Olson to speak at upcoming workshop organized by the International Institute for Trade and Development on 

"Economics of GMS Agricultural trade in goods and services towards the world market"

Chiangmai, Thailand Sep 8-12.

(07/03/05) Clyde Prestowitz quoted in the New York Times

(07/03/05) Clyde Prestowitz quoted in the New York Times
THE WORLD; O.K., Japan Isn't Taking Over the World. But China . .
New York Times (NY)
Copyright (c) 2005 The New York Times. All rights reserved.
July 3, 2005

THE WORLD; O.K., Japan Isn't Taking Over the World. But China . .

NOT even 20 years have passed since the apparently unstoppable Japanese economic juggernaut struck fear in the hearts of Americans, and now China has emerged to be seen as the new economic menace threatening the nation's vital strategic interests.

America's boom in the 1990's, coupled with Japan's decline into an economic quagmire through much of the decade, quelled most fears that the Japanese were going to eat our economic lunch.

But now China has set out to snap up everything from Unocal to Maytag, not to mention a steady diet of United States Treasury bonds. And many of the leading voices who worried about Japan in the 1980's are warning that China presents a much bigger and more complex conundrum.

"In retrospect I probably did overstate the nature of the Japanese challenge," said Chalmers Johnson, a prominent expert on Asia who in the early 1990's argued that Japan was "the only nation with real leverage over the United States." But, he added, "China is several orders of magnitude different from Japan."

China is not only much bigger and more populous. Its economy is likely to become the largest in the world at some point in the next 50 years. As China keeps growing at a rubber-burning pace, competition with the United States over energy resources alone could cause substantial tension.

Americans' fear of Japan's ascendancy in the 1980's was inspired by economics and pride. The growing bilateral trade deficit, as Japanese companies acquired leadership in industries that were once dominated by American businesses, cast a pall on America's self-confidence. The Japanese purchase of high-profile American assets, whether Columbia Pictures or the Pebble Beach golf course, just rubbed it in.

Relations with China have a more complex geopolitical dimension. Unlike Japan, China is likely to become a military power. And it is not an unconditional ally. From Taiwan to the Middle East, the strategic interests of China diverge from America's. As it throws its weight around, to secure supplies of energy, say, or to avail itself of strategic technology, China can cause American policy makers no end of discomfort.

For instance, if the United States government were to block the China National Offshore Oil Corporation from acquiring Unocal, it might just push China into cutting energy deals that the United States government would rather it did not make with countries like Russia or Iran.

"Clearly the relationship between the United States and China is much more ambivalent than that between the United States and Japan," said Clyde V. Prestowitz, a trade negotiator during the Reagan administration who in the 1980's warned that Japan's ascent could eclipse the United States' power and compromise its prosperity.

Those differences might warrant a more careful review of deals like the attempted purchase of Unocal by China's state run oil company.

Robert B. Reich, the former secretary of labor in the Clinton administration who as a Harvard professor in the early 1990's argued that big Japanese investments in the United States were not threatening, says today that a Chinese acquisition of a potentially strategic asset like Unocal could be problematic.

"In economic terms there is no reason to block Chinese ownership of U.S. assets just as there was no reason to block Japan from buying U.S. assets in the 1980's," Mr. Reich said. "But in political terms in 2005 there may be a reason to take seriously the downside of China owning Unocal."

But even those most concerned about China's rise up the economic, political and military ladder recognize another, perhaps more important difference between China and 1980's Japan. The United States has a vested interest in China's success.

For starters, whereas Japan's success at the time was inevitably seen as America's failure, today American businesses are all rooting for China to succeed. Because they own a lot of it.

"It was virtually impossible for a foreigner to make an acquisition in Japan," Mr. Prestowitz said. "In China its 'y'all come.' American business is part of the China lobby, not the anti-China lobby."

Some of Japan's old foes view America's growing interdependence with China with suspicion. "Interdependence means dependence," said Susan J. Tolchin, a professor of public policy at George Mason University who in 1993 was the co-author of "Selling Our Security," which argued against allowing foreign investment in American technology companies. "If we lose our economic independence we are going to lose our independence of movement on foreign policy."

Yet most acknowledge that China's transformation from a struggling Communist state to a prosperous nation with a growing stake in the global system of market economies is in America's best interest. For example, if the Chinese central bank owns oodles of United States Treasury bonds, it has a reason not to want to destabilize the bond market.

"I cannot see how a rich bourgeois China could be not in our interest," Mr. Johnson said. "If we're interested in our security we should establish collaborative ties with China right now."

The difference in emphasis appears in a shift in Mr. Prestowitz's writing about Asia. In 1988, he published "Trading Places: How We Are Giving Our Future to Japan and How to Reclaim It." This year, he published "Three Billion New Capitalists: The Great Shift of Wealth and Power to the East."

Today, Mr. Prestowitz said, the biggest risk is not that China will succeed in rising to become an economic superpower. The biggest risk is that it will fail.

Photo: Early Rival -- Auto workers destroyed a Toyota Corolla in Chicago Heights, Ill., in 1981, when Japan was deemed the greatest threat to American economic dominance. (Photo by Associated Press)

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