Strong China ties vital to economy

By Harold McGraw III

When President Barack Obama meets President Hu Jintao in China this week, he will have to cross the same ocean that Richard Nixon flew over for his famous meeting with Mao Tse-tung in 1972. Yet today, the distance seems nowhere near as far.

In the years since that first historic meeting, growing economic ties have brought our countries closer together than ever before. Over the past 10 years alone, trade between the United States and China has more than quadrupled, from less than $100 billion to more than $400 billion. And while the United States has become the largest market for Chinese exports, China has emerged as the third largest market for American exports.

With all the uncertainty in today’s global economy, this much is certain: The relationship between the United States and China will help define the 21st century. Together, our countries now account for nearly a third of the world’s gross domestic product. And as a result, the world looks to our nations for leadership in the wake of the financial crisis.

For the sake of global prosperity, the U.S. and China must answer this call together. Our countries need to strengthen their partnership around three pillars: fueling economic recovery, fostering open markets, and forging new economic relationships.

First, fueling economic recovery: The United States and China need to continue working together to lift the global economy from the downturn. While the crisis impacted the United States and China very differently, the situation could have been far worse in both countries if our leaders had not responded with strong measures, including enacting massive stimulus plans.

In the long run, both our nations recognize the need to build a more sustainable foundation for lasting growth. As Americans begin saving more, China will likely not be able to depend as heavily on American consumption for economic growth.

As a result, it appears that China will face two options: either accept slower growth or generate new opportunities for growth. These new opportunities could come from many different sources — from increasing domestic consumption, to diversifying into new markets, to investing in innovation. As our countries continue this rebalancing act, our leaders will need to continue coordinating closely.

Second, fostering open markets: The United States and China need to continue working together to resist protectionism and to expand trade and investment. During times of economic challenge, it can be tempting for nations to seek comfort behind tariffs and barriers against the outside world. History, however, has shown the folly of this course. When nations beggar their neighbors, they ultimately beggar themselves.

Instead of retreating from the world, the U.S. and China should take the opportunity to open their economies further. We should reduce barriers to trade and investment around the world by completing the Doha Development Round. And around the globe, we should remember that global trade and investment are not the cause of our problems. They are the solution.

Finally, forging new relationships: The United States and China need to work together to build new economic relationships at all levels. At the government level, President Obama and President Hu took a welcome step by expanding the Strategic and Economic Dialogue. This forum will give our leaders the opportunity to discuss critical challenges.

At the business level, we understand that new relationships can lead to new innovations. As Chinese companies begin developing more of their own new technologies, they will share a growing interest with American companies in strong protections for intellectual property. And these protections will be especially important as our countries work together to meet the need for clean energy technologies.

In every sector of our economy, we should welcome fresh opportunities for partnership. For example, during my trip to China last week, we launched new partnerships with Chinese companies in professional development and online learning.

Over the years, the relationship between the United States and China has come a long way. Through all the changes, it has emerged stronger than before. While an ocean still separates our two countries, a bridge of shared economic interests now runs between. And now is the time to strengthen that bridge.

Harold McGraw III is chairman, president and CEO, The McGraw-Hill Companies and chairman, Emergency Committee for American Trade.