Introduction

American trade policies today are more controversial than at any time in two decades. And no topic is getting more attention than China.

The Bush administration's Commerce and Treasury secretaries have made recent pilgrimages to Beijing to deliver appeals, petitions, and protests. Candidates in the Democratic primaries spent much of the winter debate season arguing for tougher trade policies. China is charged with delinquency in its World Trade Organization (WTO) commitments and Bush is charged with weakness in enforcing them. Lawsuits are flying: the AFL-CIO filed a case against Chinese labor abuses with the U.S. Trade Representative in March and a group of manufacturers is said to have prepared one against Chinese currency policy; the U.S. Trade Representative, rejecting both, has filed its own case protesting Chinese computer chip taxes at the WTO.

The sheer number of complaints is striking. But equally striking is the fact that few of them are new. China's labor record has not notably improved in recent years -- but neither has it deteriorated. China's currency rates have not changed since 1994. And China's implementation of WTO commitments has gaps -- with computer chips a high-profile dispute, and intellectual property rights perhaps even more so. But, the Chinese economy is more open than ever before, and sucking in imports at an extraordinary pace. Why, then, such a heated debate? Are Americans blaming foreigners for frustration or failure at home? Has China policy, intended since the Nixon administration to integrate the world's most populous nation into the global economy, gone wrong -- or has it gone entirely too well? In fact, something deeper than either of these things may be at work.

The 21st century has brought rapid integration of the Asian economy, and the emergence of what can be termed an informal "Asian Union." For the first time, China's manpower and low costs are united with the money and technology of Japan, Korea, Taiwan, Hong Kong, and Singapore. China's emergence as America's most visible source of goods thus reflects a structural change in the Asian economy more than it reflects new Chinese trade or labor policies. The development offers economic and security opportunities, carries with it potential sources of risk and financial instability, and also means a powerful new competitive challenge.

Demographic realities, to be noted later, show that Asia's new competitive advantages are unlikely to last forever. But in the next decade, American businesses, workers, and government may find themselves adjusting to a much more challenging environment. Trade policy can be only a part of the response. Just as America met the Asian challenge of the 1980s with the improved business competitiveness and government policies of the 1990s, we must "raise our game" again.