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Might food safety trigger a trade war between the U.S. and China that yuan revaluation and the bilateral trade balance couldn't? Yes, if both countries aren't careful.
Neither side wants a trade war. It would be devastating. But as poisoned pet food, toxic toys and toothpaste containing antifreeze move the China issue from the cool business pages of The Wall Street Journal to the charged glare of the nightly news, it risks taking on a political life of its own.
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The European Union's consumer protection commissioner is in China this week, and American officials will follow her next. Beijing, for its part, shuttered three companies at the center of the tainted food row, and executed its food minister for bribery amid worldwide media coverage. The message was unmistakable: We're serious about this.
Another unmistakable message was delivered with China's banning earlier this month of chicken and pork imports from such U.S. companies as Tyson Foods, Sanderson Farms, Cargill, AJC and Triumph Foods on the grounds that salmonella and growth hormones had been found in their products. The move followed U.S. restrictions on Chinese seafood and came just a day after the U.S. commerce secretary called for China to step up its oversight of product and food exports.
Expect a protectionist Congress to ignore the warning. Anti-China spirits are stirred. It's election season in America, and Dobbsian arguments that the U.S. lost manufacturing jobs because of Chinese currency manipulation to favor exporters are gaining ground, although China is probably taking more jobs from Mexico these days than from the U.S.
An equally nationalistic bent is to be found in China, if among an equally small but noisy minority.
Trade with the U.S. has played a huge role in making coastal China prosperous, but as the anti-Japanese demonstrations in 2005 remind us, xenophobic sentiments can be turned on at the flick of a switch.
China and the U.S. have divergent perspectives. Beijing sees its problem of unsafe food and other exports as part of the costs of rapid economic growth, and which plays on concerns about public health, environmental pollution and tsocial unrest---a proxy for the legitimacy of the Communist Party's rule, which is being questioned by the emerging urban middle class.
That makes it a domestic political issue to be dealt with through new regulation and rules and the exemplary application of existing ones, though not beyond a point where it will slow economic growth, especially in the politically sensitive countryside where a web of sub-sub-contractors toil away making China's low-cost exports.
In America, the issue is seen through the prism of the trade imbalance, currency valuation and neo-mercantilist trade policy. There is a national interest to be defended. That makes it an international issue that will be dealt with by government-to-government actions, targeting Chinese imports.
Neither side will be satisfied with the results. Hard-liners will mouth hawkish positions--stoking the flames of trade war. China will see dealing with hazardous exports as a concession deserving of a reward--say, less grief over yuan revaluation. In the U.S. any success will only encourage China-bashers to redouble their attempts to browbeat China into reform on a wide range of issues--and especially ahead of next year's Beijing's Olympic Games, which are seen as an Achilles' heel.
And that will just play into the hands of China's hard-liners. Nationalism is a potent force. China doesn't like to be told what to do any more than America does.
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