On April 14th, 1971, President Richard Nixon announced an end to the U.S.-led embargo on the People's Republic of China, a step which marked the beginning of Sino-American economic normalization and a new direction for U.S. foreign policy despite the absence of diplomatic relations with Beijing. During a work in progress presentation, Wilson Center Public Policy Scholar Dai Chaowu assessed the U.S. policy toward trade liberalization as an important element in Nixon's diplomacy and as a critical means of turning détente into a practical reality. According to Dai, this policy paved the road for Sino-U.S. rapprochement and also influenced China's development by providing an opportunity to import new technology and equipment from the West. This played a key role in China's modernization and placed the PRC on the path to "Reform and Opening" later in the decade.
According to Dai, Nixon recognized the rapidly changing patterns in world trade and responded by liberalizing U.S. trade policies. Four factors in particular contributed to Nixon's reappraisal of U.S. trade policy: first, the interdependence of the global economy had become a reality; second, a number of foreign countries could openly compete with the United States in the world market; third, the U.S.' traditional surplus in the balance of trade had disappeared; and fourth, less developed countries needed improved access to the markets of industrialized countries if their economic development plans were to continue. In Dai's view, Nixon's economic diplomacy evolved after a careful assessment of U.S. policies towards communist Europe and Asia. A team of foreign policy planners, including Henry Kissinger, reformulated the administration's approach towards trade liberalization in order to improve and enlarge trade of nonstrategic commodities with the Soviet Bloc and communist Asia. According to Dai, Nixon believed that China was a rising economic power and personally encouraged U.S. business groups to invest there. For example, in 1972 Nixon facilitated a $150 million deal between Boeing and the PRC.
Nixon's trade liberalization was instrumental in the Sino-American rapprochement. According to Dai, it became the cornerstone of a Nixon-Kissinger strategy towards China, shifting the focus from confrontation towards reconciliation and peaceful relations. Nixon's economic diplomacy ushered in a new era of cooperation and peaceful negotiations by extending a hand to China and the Soviet Union.
Dai also stressed that the influence of the new trade relationship with the U.S. contributed to dramatic changes in Chinese domestic politics. It was a significant factor in bringing an end to the Cultural Revolution and in helping usher in a new and more dynamic period of development. Foreign trade expanded and new technologies were imported. This gradually led to a shift in the pattern of Chinese foreign trade. Chinese foreign policy expanded to the West as Chinese leaders became increasingly aware of the benefits of open markets and free trade. Their goal was to bring China back to the international system. As Dai noted, Deng Xiaoping later claimed that without the groundwork laid by the U.S. and Chinese leadership in the late 1960s and early 1970s, China could have experimented with certain reforms, but would not have reached the same level of progress.
In conclusion, Dai argued that trade liberalization and the Sino-U.S. rapprochement improved the position of the U.S. in the global Cold War. China's opening seemingly asserted the sustainability and dominance of the U.S. growth model. China's rapid industrialization and adoption of the American model for development, Dai said, dealt a blow to Soviet prestige. Dai suggested that rapprochement was part of a greater pursuit to extend U.S. power and influence world-wide.
Drafted by Kristina Terzieva, Program Assistant and James Person, Program Associate
Christian Ostermann, Director, History and Public Policy Program