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"I believe that to meet the challenges of our times, human beings will have to develop a greater sense of universal responsibility. It is the foundation for world peace."

How much does hosting the Dalai Lama hurt your country's trade with China?

November 5, 2010

Joshua Keating
Foreign Policy
November 2, 2010

A fair amount, apparently. Just not for very
long. Andreas Fuchs and Nils-Hendrik Klann of
Germany University of Geottingen looked at 159
countries' trade patterns with China between 1991
and 2008 to see what effect a high-level meeting
with the Dalai Lama had on bilateral trade. Here's what they found:

     Empirical evidence confirms the existence of
a trade-deteriorating effect of Dalai Lama
receptions for the Hu Jintao era (2002-2008).
However, we find at best weak evidence to support
the existence of such an effect in earlier years.
While our results suggest that systematic trade
reductions are only caused by meetings with heads
of state or government, no additional impact is
found for meetings between the Dalai Lama and
lower-ranking officials. As a consequence of a
political leader's reception of the Dalai Lama in
the current or previous period, exports to China
are found to decrease by 8.1 percent or 16.9
percent, depending on the estimation technique
used. Furthermore, we find that this effect will
have disappeared two years after a meeting took
place. Analyzing disaggregated export data,
'Machinery and transport equipment' is found to
be the only product group with a consistent
negative effect of Dalai Lama meetings on exports
across samples and estimation techniques.

"Meet with him and we will temporarily reduce our
machinery and transport equipment imports!"
doesn't sound like the scariest of threats.

The pattern seems similar to what happens with
defense ties. China halted its military exchanges
with the United States in January in response to
U.S. arms sales to Taiwan, but there are strong
signs now that these ties will soon resume.

One way to read this is that President Barack
Obama was right last year to postpone his meeting
with the Dalai Lama until after a summit with
Chinese leader Hu Jintao. If you know diplomatic
relations are going to take a temporary hit, why
not postpone it until a more convenient time. On
the other hand, the fact that the punishments
China inflicts on its trading partners don't seem
to last that long lends credence to Vaclav
Havel's argument that "When someone soils his
pants prematurely, then [the Chinese] do not respect you more for it."
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