Teaching Us to Play by Our Own Rules

TGIFriday’s CITIC, Beijing
Praying for more wind
1232 hrs.

While having coffee this morning with a good friend who is about to take a senior position with a U.S. industry association in Beijing, the discussion turned, as it often does these days, to America’s continued worries about China. As we talked about the various policy issues he is likely to face, I realized we are looking at the wrong problem.

Much of the posturing in Washington and the media coverage on Sino-US relations see America’s primary challenge with China’s rise as a matter of getting China to play by global rules.

In fact, the most difficult thing for Americans to accept may be China compelling America to play by the very rules it has espoused for decades.

Standard Deviations

There are several examples, but the one that leapt to mind was in the matter of standards. America preaches to China about accepting global standards rather than creating its own. We see the creation of the TD-SCDMA wireless broadband standard, the WAPI wireless area network standard, the CMMB mobile television standard, and the EVD video standard as protectionism against WCDMA, Wi-Fi, DVB, and Blu-Ray.

We forget, of course, that America and Europe have done the same in the past. The ATSC digital television standard was created as a rejection of a European-developed one. Europe, for its part, created the PAL television standard and the WCDMA mobile standard to get out from under the American thumb.

White Man Speak with Forked-Tongue

Standards are but one example. The history of American trade is rife with the very sort of protectionism and import-substitution for which we chide China. As Bloomberg BusinessWeek noted last month in an article entitled “China: Closing for Business?:”

China sees how other countries—notably the U.S.—have used standards, regulations, and buy-local policies to build their own industries. Beijing feels more than entitled to do the same. The U.S. Trade Representative’s Office started 28 cases against Chinese companies last year. And “states like California have wide latitude in their procurement policies, so they can give American companies an advantage,” explains Nicholas Lardy, senior fellow at the Peterson Institute for International Economics.

We are about to learn the cost of allowing our behavior to deviate from our principles.

China Rules

Whenever we behave in a manner divergent from accepted principles in international affairs, we make a de facto change in the rules. It is not acceptable in an increasingly multi-polar global polity to implore others to “do as we say, not as we do/did” merely because we have mended our ways. A priest may forgive you for past sins: diplomacy lacks such absolution.

That truism will bedevil all of our efforts to get China to play ball by our rules. Worse, though, it gives China wherewithal to make a global case for us to   make amends for our own past sins.

The lesson for business is plain: we have to recognize that there is a new set of rules governing the international business environment. Our job as executives is to learn how to succeed under those new rules.