Breaking off on 28 September after three days of talks, both sides seemed to blame the other with American textile manufacturers calling China’s proposal “still unacceptable” and Chinese negotiators accusing America of reneging on free market principles.
It comes at a time of mixed messages from the two countries – while economically moving ever closer together, politically the relationship remains fractured, with growing concern in the US towards the potential volatility of the awaking dragon.
Losing 26,000 jobs since the start of 2005, the American textile industry accuses the Chinese government of unfairly subsidising its own textile manufacturers with low oil prices at the pump, a manipulated currency, and lines of credit extended by banks that rarely collect.
“Like nineteenth century US steel barons, they are trying to run everyone else out of the market,” Lloyd Wood, of lobby group American Manufacturing Trade Action Coalition, told Aljazeera.net.
The latest in a long line of contentious issues, the textile dispute highlights the love-hate relationship between the two countries as both learn how to balance the dramatic rise of the world’s most populous nation with the interests of its sole superpower.
Earlier this summer saw several examples where issues normally the domain of trade negotiators became heatedly politicised.
Beijing’s attempt to buy Unocal
In July an $18.5 billion bid by Chinese state run oil company CNOOC for Unocal, an American oil firm with mostly Asian assets, was dropped following an outpouring of political hostility from Washington.
At the same time, the US Congress threatened trade sanctions if China did not revalue its currency spawning a slew of editorials discussing the emergence of a “China threat”.
“The relationship with China is just big and complicated and it’s got good parts and it’s got not so good parts,” said US Secretary of State Condoleezza Rice in an interview with The New York Times.
“In fact, we want a strong and confident China. I actually think a weak, not-confident China is potentially much more dangerous because a China that can be a good partner would be actually a very positive thing for international system.
“Our job is to continue to press the positive forces forward while not ignoring the fact that there are, in this very complicated relationship, a lot of difficult issues.”
Based on recent projections, China’s economy is on course to dominate the world within the next 50 years.
A report published in mid-September by the Organisation for Economic Cooperation and Development said that China will become the world’s leading exporter by 2010, with 10% of the world’s market.
Another report by Deutsche Bank says China will have the second largest economy by 2025, having overtaken Japan.
“The influence of China in East Asia and the Asia Pacific will have a strong impact on the world so countries need to face up to this reality. It is an unstoppable rise but that does not mean we will have conflict with other nations”
Others have said that by 2050, it will be the largest.
All this seems a long way from the Chinese economy of today, an economy that is still predominantly agrarian and marked by extremes of wealth and largescale poverty.
For strategists however, such reports prelude a shifting dynamic in the global balance of power and many are unsure how to react.
Corrado Letta, an economic and strategy adviser to the European Union told Aljazeera.net: “There is quite a lot of ambivalence about China [in East Asia].
“People are afraid of China, but all these countries were only able to save their economics because their exports to China increased, so ultimately these countries, Asean (the Association of Southeast Asian Nations), Japan, and South Korea, have got to find some way to live with China.”
One aspect of this has been an increase in military spending.
Rising 15% annually for the past six years, total defence budget is now over $30 billion per annum.
Some reports believe it may be as much as $100 billion, and that it will equal US spending by 2025 as China aims to develop forces strong enough to deter American involvement in any confrontation with Taiwan.
And with the growing ascendancy of China, it is no longer about simply balancing trade with human rights issues, as was the case a decade ago.
Trade issues have become
Increasingly China, with its veto power at the United Nations, is involving itself in international disputes, often at odds with the US.
Mostly notably hosting the North Korean six-party talks, which last month reached an agreement of sorts after several years of dialogue, China is also embroiling itself in the Sudan and Iranian crises, where it has significant economic investments which it does not want threatened by possible UN sanctions.
Beijing is also expanding its influence in Central Asia through the mechanisms of the Shanghai Cooperation Organisation, and is looking to lead a still nascent movement to create a union of Asian nations.
In advocating a more hands on role for the country, China’s leaders regularly stress the notion of a “peaceful rise”.
“The influence of China in East Asia and the Asia Pacific will have a strong impact on the world so countries need to face up to this reality,” says Xu Jian of the China Institute for International Studies in Beijing.
“It is an unstoppable rise but that does not mean we will have conflict with other nations,” he told Aljazeera.net.
Cold War mentality
Querying why the US does not react with hostility to the rise of India, a country with similar growth figures though a democratic political system, observers in China express concern there is a lingering Cold War mentality in Washington.
China is a country more and more dependent on trade and investment … and a tranquil environment. This is a golden commercial age for US firms [to work with China]”
“In American politics there are two China factions, one has long-standing prejudices towards China while the other regularly visits the country and is more objective,” believes Shen Shishun, a former Chinese diplomat to the US.
Others take a more sanguine approach.
In dealing with China, says Charles Martin, the head of the US Chamber of Commerce in China, a lobbying group for US businesses, “the textile dispute is a way station to a much bigger picture. China is a country more and more dependent on trade and investment … and a tranquil environment.
“This is a golden commercial age for US firms [to work with China],” he told a group of Western journalists recently.