Reardon, Lawrence C.

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University of New HampshireUniversity of New Hampshire Scholars' RepositoryThe University Dialogue Discovery Program2005"No dogs or Chinese allowed": globalization andChinaLawrence C. ReardonUniversity of New Hampshire, chris.reardon@unh.eduFollow this and additional works at: https://scholars.unh.edu/discovery_udPart of the Asian Studies Commons, and the Economics CommonsThis Article is brought to you for free and open access by the Discovery Program at University of New Hampshire Scholars' Repository. It has beenaccepted for inclusion in The University Dialogue by an authorized administrator of University of New Hampshire Scholars' Repository. For moreinformation, please contact nicole.hentz@unh.edu.Recommended CitationReardon, Lawrence C., ""No dogs or Chinese allowed": globalization and China" (2005). The University Dialogue. 7.https://scholars.unh.edu/discovery_ud/730    WHERE IN THE WORLD IS UNH?“No Dogs or Chinese Allowed”: Globalization and ChinaL AW R E N C E  C. R E A R D O ND E PA RT M E N T  O F  P O L I T I C A L  S C I E N C EAn Evolving Process of CooperationGlobalization is a process in which barriers betweenpeople—both natural and man-made—are dismantledto allow a freer of exchange of ideas, capital, goods, andservices.1 This ongoing process of change began whenindividuals ﬁrst communicated with one another to se-cure food and shelter. Such behavior resulted in local-ized communities of cooperation, of which less nomadicgroups organized into villages, towns, and eventuallynation-states.Yet according to Thomas Hobbes, one of the mostinﬂuential British political philosophers of the 17TH cen-tury, these cooperation communities did not live in har-monious bliss, but in a brutish, anarchic environment.2Individuals cooperated within small communities, asmembers could ensure cooperation. Yet as groups grewin size, individuals had a greater ability to pursue theirself-interest, which was not necessarily for the beneﬁt ofthe community.3 To prevent such defections, cooperativecommunities entered into a social contract, in whichthey surrender their individual rights to all-powerfulleaders such as kings and emperors (i.e., hegemons),who ensured that the greatest good could be achieved.Embodying such absolutist ideals was Hobbes’ contem-porary, the French monarch Louis XIV, who reportedlystated, “L’état c’est moi” [I am the state]. With the devel-opment of the modern democratic capitalist state, hege-monic rulers were replaced by elected leaders, who hadto adhere to the rule of law.4These laws also created artiﬁcial barriers between in-dividuals living in separate cooperative communities.5Coexisting in a brutish anarchic environment, coopera-tive communities erected protectionist barriers to insu-late themselves from external threats.6 Over time, thesecooperative communities established separate lan-guages, customs, and other forms of preferential ex-change that further separated the community memberfrom “the other.” Natural barriers of exchange also ex-isted, such as the physical distance between communi-ties. Large-scale exchange of goods and services thus oc-curred only within the global trading empires, such asimperial Rome, China, Spain, France, and Great Britain,whose hegemon could enforce behavioral norms withinthe cooperation community. Yet lacking a single globalhegemon, global economic warfare could break out be-tween cooperative communities at any time, such as theregional trade wars of the 1930s.7During the post-World War II period, the large trad-ing empires relinquished formal control of their impe-rial colonial holdings. Led by the United States, demo-cratic and non-democratic capitalist countriesembarked upon a new stage globalization that graduallyincreased the scale of the cooperation communities thatestablished global rules and norms of behavior—or in-ternational regimes.8 Within the global trade regimeembodied by the World Trade Organization (WTO),these capitalist economies dissolved many protectionistbarriers to international exchange and sacriﬁced manysovereign economic rights.9 Multinational corporations(MNCs) and international ﬁnancial institutions thuscould link together the developed and developingeconomies; aided by technological, ﬁnancial, and trans-portation innovations, these cooperative communitiesbecame further integrated, leading to the globalizedworld of today.Globalization and DevelopingEconomies: ChinaEmerging from the colonial exploitation of the past,economies in the developing world were far more sensi-tive to the detrimental effects of the anarchic interna-tional environment dominated by the capitalist coop-eration communities. They sought to achievecomprehensive economic growth by adopting two in-dustrial development strategies—inwardly- and out-wardly-oriented development.10Until the early 1980s, China adopted inwardly-oriented strategies of development, which regarded theinternational economy as a dangerous adversary, whoseinﬂuences on the domestic economic growth needed tobe controlled or eliminated. Beginning with its relation-ship with the Soviet Union in the 1950s, China imple-A UNIVERSITY DIALOGUE ON GLOBALIZATION  2005–2006    31mented a comprehensive strategy of importing manu-facturing technology for intermediate goods (petro-chemicals, steel), producer durables (machinery) andconsumer durables (automobiles, televisions, etc.) inorder to reduce imports from abroad. This strategy wascalled import substitution.11 Combined with vigorousregulation of foreign investment and extensive subsidiesfor domestic industry, China protected state-ownedenterprises’ (SOEs’) monopoly of the domestic market.While making export activities unproﬁtable, the over-valued exchange rate enabled China to import industrialproduction technology and equipment for targetedindustrial sectors. In essence, China depended on theinternational marketplace in the short-term in order toachieve autonomy or self-reliance in the long-term.During the Cultural Revolution of the 1960s, theChinese leadership implemented a more autarchic (i.e.,self-sufﬁcient) strategy of development, which man-dated the complete isolation of China from the globaleconomy except in a few instances.12By the early 1980s, the Chinese leadership hadlearned the limitations of inwardly-oriented develop-ment, just as leaders in Japan, South Korea, and Taiwanhad during the previous decades.13 China thus adoptedan outwardly-oriented development strategy, which isbased on theories of comparative advantage proposedby the English political economist, David Ricardo.14Theoretically, developing economies enjoy comparativeadvantage in labor and/or land, and thus expandproduction of labor-intensive commodities for thedomestic and export markets. Lacking capital and entre-preneurial ability, developing economies increaseimports of capital intensive products and progressivelylift many protectionist barriers to foreign direct invest-ment (FDI). Eventually, they adopt a more equitablepricing system for production inputs, revalue their cur-rencies, and eliminate certain protectionist quotas andnon-tariff barriers.15 Unlike the pre-1979 period,Chinese leaders considered the global economy as a“partner in development,” which could provide aninvaluable source of export revenue, technology innova-tion, and capital ﬁnancing.During the subsequent two decades of outwardly-oriented development, China became the premier desti-nation for FDI and enjoyed an unprecedented exchangeof technical and managerial expertise. As a result ofthese and other economic reforms, China enjoyed anaverage annual real GDP growth rate between 1979and 2004 of 9.3 percent; by the end of 2004, China hadattracted $563 billion of FDI, 43 percent of which camefrom Hong Kong, 8.5 percent from the United States,and 8.3 percent from Japan.16 Having learned like Japanand the other East Asian economies to harness foreigncapital and technology to develop its economiccompetitiveness, China has now entered the next stageof globalization by establishing Chinese MNCs—the“Go Global” strategy.Restricting Cooperation CommunitiesThe United States and the European Union are greatlyconcerned about the impact of Chinese globalizationschemes. Americans continued to import foreign goodsat record levels in 2004, resulting in a $617 billion overalltrade deﬁcit, of which there was a $162 billion bilateraltrade deﬁcit with China.17 China produces two-thirds ofthe world’s television sets, watches, DVDs, and other do-mestic electronic goods. During the ﬁrst four months of2005, Chinese garment exports to the US rose between70-1,500 percent.18 China is now the largest consumer ofcopper, tin, aluminum, lead, zinc, platinum, steel, andiron ore, resulting in tremendous cost increases aroundthe globe; it is claimed that the current $60 per barrelcosts of petroleum is due to China’s burgeoning auto-mobile industry. Chinese companies have recentlysubmitted solicited and unsolicited bids for major UScompanies. China’s largest computer hardware manufac-turer, Lenovo, acquired IBM’s ThinkPad division; TLCbought the RCA television division from the Frenchmanufacturer, Thomson. Seeking to expand its share ofthe international marketplace for household appliances(i.e., white goods), the Chinese MNC Haier unsuccess-fully bid $1.28 billion to acquire the US manufacturer,the Maytag Corporation. In 2005, China’s third largestenergy company, the China National Offshore Oil Cor-poration (CNOOC), announced plans to acquire theCalifornia-based petroleum and natural gas corpora-tion, Unocal, for $18.5 billion.19Although China is now a member of the WTO, the USreaction has been increasingly negative and protection-ist. The Congress and the Administration successfullydemanded that China revalue its currency, even thoughmost economists agree that such reevaluation will havelittle impact on the current account deﬁcit.20 Despite thetraditional support for free trade, the US is currentlyengaged in talks with Chinese trade ofﬁcials concerningthe US proposal to impose quotas and restrictions onseven categories of Chinese textile and garment imports;the EU has already restricted Chinese textile imports.While the US government approved Lenovo’s acquisi-tion of IBM’s laptop computer division, the US House of32    WHERE IN THE WORLD IS UNH?Representatives voted 398 to 15 that CNOOC’s acquisi-tion of Unocal’s energy resources threatened US na-tional security.21As Tom Freidman has argued, globalization is a fact oflife that the US should embrace and not use as an excuseto erect protectionist barriers.22 The US should be tout-ing China’s transformation from a moribund, Marxist-Leninist state to a globalizing, capitalist economy as apotential model for other developing nations. Simulta-neously, the US should leverage China’s desires to “GoGlobal” to encourage China’s compliance with interna-tional trade laws and norms of behavior. As ChineseMNCs enter the US marketplace, the US should insistthat US-based MNCs be accorded similar treatmentwithin the Chinese marketplace. This would addresslooming problems with Chinese restrictions on foreign-invested enterprises’ access to the Chinese market, thelax enforcement of intellectual property rights (IPR),and other such problems.23 Finally, the US must remem-ber that US protectionists railed against Japan, Inc. inthe 1980s. Yet, the US allowed Japanese MNCs such asToyota, Honda, and Nissan to establish US-based designand manufacturing facilities. Located throughout theUS, these facilities are producing high-paying jobs forUS workers and top-quality automobiles for the USmarket. In these days of high oil prices, the competitionfrom these truly multinational corporations is convinc-ing Detroit to switch from producing gas-guzzling SUVsto developing hybrid cars that are highly fuel efﬁcientand produce low emissions.Restricting cooperation communities will result in aworld of exclusivity akin to colonial Shanghai of the1930s, in which a public park sign reputedly warned,“No dogs or Chinese allowed!”24Notes1 For a general discussion of economic globalization, seeSuzanne Berger, “Globalization and politics,” Annual Re-view of Political Science 3 (2000): 43–62; Joseph E.Stiglitz, Globalization and its discontents (New York: W.W. Norton & Company, 2002); Jagdish Bhagwati, In de-fense of globalization (New York: Oxford UniversityPress, 2004); Harold James, The end of globalization: les-sons from the Great Depression (Cambridge, MA:Harvard University Press, 2001).2 Thomas Hobbes, Leviathan (New York: CambridgeUniversity Press, 1996); Kenneth Waltz, Man, the stateand war (New York: Columbia University Press, 2001).3 Mancur Olson, The logic of collective action(Cambridge, MA: Harvard University Press, 1971).4 Sandra Halperin, War and social change in modernEurope (New York: Cambridge University Press, 2004).5 Jagdish Bhagwati, Protectionism (Cambridge, MA:MIT Press, 1989).6 Kenneth Waltz, Theory of international politics(Reading, MA: Addison-Wesley, 1979).7 John A.C. Conybeare, Trade wars (New York: Colum-bia University Press, 1987); C. P. Kindleberger, The worldin depression (Berkeley, CA: University of CaliforniaPress, 1973).8 John Ruggie, “International regimes, transactions, andchange: embedded liberalism in the postwar order,” 36International Organization (Spring 1982): 379–416.9 Robert Gilpin, The challenge of global capitalism(Princeton, NJ: Princeton University Press, 2000); SusanStrange, The retreat of the state: the diffusion of power inthe world economy (Cambridge, MA: Cambridge Univer-sity Press, 1996); Ethan Kapstein, Governing the worldeconomy: international finance and the state (Cambridge,MA: Harvard University Press, 1998).10 Malcolm Gillis, Dwight H. Perkins, Michael Roemer,Donald R. Snodgrass, Economics of development (NewYork: W. W. Norton, 1992), Chapter 15.11 Bela Balassa, The Process of industrial developmentand alternative development strategies. Essays in interna-tional finance, no. 141 (Princeton: Princeton UniversityPress, 1980), 5–11.12 Lawrence C. Reardon, Reluctant dragon: crisis cyclesin Chinese foreign economic policy (Seattle, WA: Univer-sity of Washington Press, 2002).13 Stephen Haggard, Pathways to the periphery (Ithaca,NY: Cornell University Press, 1990); World Bank, TheEast Asian miracle: economic growth and public policy(New York: Oxford University Press, 1993).14 David Ricardo, The principles of political economy andtaxation (New York: Dutton, 1969); Berger, 49–50.15 Hla Myint, Exports and economic development of lessdeveloped countries (London: MacMillan, 1979), 105.16 Wayne M. Morrison, China’s economic conditions, CRSIssue Brief for Congress, IB98014, 26 May 2005, 2–5.A UNIVERSITY DIALOGUE ON GLOBALIZATION  2005–2006    3317 Morrison, 2; The Washington Post, 22 July 2005.18 Vivian C. Jones, Safeguards on textile and apparelimports from China, CRS Issue Brief for Congress,RL32168, 26 May 2005.19 Financial Times (London), 18 July 2005.20 Wayne Morrison and Marc Labonte, China’s exchangerate peg: economic issues and options for US trade policy,CRS Report for Congress, RL32165, 10 May 2005. ForChina’s recent moves to revalue the RMB, see FinancialTimes, 22 July 2005.21 The Washington Post, 31 July 2005; 22 July 2005; 11July 2005; 16 July 2005.22 Thomas Friedman, The world is flat (New York:Farrar, Straus and Giroux, 2005).23 The Washington Post, 31 July 2005.24 According to Robert Bickers, there was no such signin Huangpu Park on the Shanghai Bund. See RobertBickers, Britain in China: community, culture and colo-nialism, 1900–1949 (NY: Manchester University Press,1999). Instead, this was an urban legend popularized byBruce Lee’s second major ﬁlm, Fist of Fury. Whatever thecase, the phrase captures the western and Japanese colo-nial attitudes of superiority that guided their imperialistpolicies toward China from the Opium Wars of the1830s to the establishment of the People’s Republic ofChina in 1949.

No dogs or Chinese allowed : globalization and China

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No dogs or Chinese allowed : globalization and China

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