In less than a decade, China has surpassed the United States as a trading partner for much of the world. While fueling this rise, China morphed into a key player in most major oil and gas exporting regions. The United States is no longer the hegemon of energy markets and geopolitics. China has the clout to set its own rules.
To maintain significant global influence, the United States must challenge China in international markets. That requires development of domestic energy resources and resurgence in American manufacturing.
Nearly two thirds of all nations now engage in more commerce with China than the United States. Some of the notable countries that recently shifted into this category are Australia, Brazil and South Korea. Chinese trade with African nations will likely exceed $200 billion this year. Commerce with China is also a rapidly increasing component of GDP for most countries in Latin America, the traditional backyard of the United States.
Asia, Africa and Latin America provide markets for Chinese products while supplying China with much of the oil, coal, iron, cobalt and copper it requires. Chinese steel mills consume 50 percent of the iron ore currently mined worldwide. It is projected that 50 percent of the net increase in oil production of the next 25 years will be consumed by China. With such demand, the Chinese are intent on strengthening their hand in virtually every energy and resource market.
The Chinese have not hesitated to deal with energy-rich rogue nations, such as Venezuela, Iran and Sudan. China can largely avoid competition with the United States in these markets, which supply more than 20 percent of its oil imports. In turn, these countries see economic benefits without conforming to global demands on human rights or nuclear proliferation.
In the past few years, China has turned its attention on North America with a series of energy deals in Canada. Earlier this month, the China National Offshore Oil Corp. (CNOOC) was approved for a $15.1 billion takeover of Nexen Inc., a company with vast holdings in Canadian oil sands. Oil that might flow to the United States via the proposed Keystone XL Pipeline (which has been opposed by the Obama administration) may now be loaded on tankers and shipped overseas instead.
While political leadership in the United States plays politics with domestic energy resources and thwarts a closer energy relationship with Canada, Beijing is benefiting. They have gained a sufficient stake in North American oil production to influence market prices. An additional facet of the Nexen deal is that China acquires the technology to tap deep water oil reserves in the South China Sea without outside help.
Access to energy and influence over markets helped Chinese factory exports grow almost fivefold from 2000 to 2008. Since the global recession, China's trade partnerships, especially with developing nations, have made it more resilient than America. Their exports climbed 7 percent in 2012 while the United States remained mired in economic stagnation.
Clearly, China's worldwide reach is expanding, arguably at the expense of America. The ramifications range from strengthening rogue nations to environmental degradation. If American ideals of democracy, free markets and environmental responsibility are to succeed in this new world order, the United States must be a viable challenger to China.
American manufacturing, with its superior products, must remain competitive in a global economy. That will require access to our vast domestic energy reserves, as well as strong partnerships with Canada and Mexico. Beyond meeting our own needs, the United States has the potential to become a net energy exporter by the end of the decade. This could help us stay on even ground with China.
Additionally, taxes and environmental regulations should not be excessive and prohibitive to American industry. United States diplomacy should focus on China's objectionable emissions and labor practices, but American strength ultimately depends on energy and unbridled entrepreneurialism at home.
Without products that can compete in a global market, the United States will slip further behind the Chinese juggernaut. A strong and influential America has positive ramifications far beyond our borders.
We promote democracy, human rights and environmental stewardship. That could change as China becomes the most important economic partner for most nations. An industrial America will be the only influence on how China does business.
"Right Angles" appears on the third Tuesday of the month. James D. Kellogg of New Castle is a professional engineer, the author of the novel E-Force, and the founder of LiberTEAWatch.com . Visit JamesDKellogg.com or email firstname.lastname@example.org.