Business Times - 09 Feb 2010
Populist pressure could push Obama into China bashing
Amid difficult economic ties, China has emerged as a convenient target for both Democrats and Republicans
By LEON HADAR
ONE of the fantasies concocted by Obamaniacs in the aftermath of the 2008 presidential election was that the Chinese leadership would welcome the election of an African-American president with whom supposedly they shared a non-white heritage.
Mr Obama, who was born in Hawaii and went to primary school in Indonesia, highlighted his 'civilisational' affinity with East Asians when he noted during his first visit to the region that he was the America's first 'Pacific president'.
In fact, not many US watchers in Beijing were celebrating the change in the balance of power in Washington after the Republicans lost their control over the White House and Capitol Hill in 2008.
Indeed, consider one of the ironies that have characterised the Sino-American relationship since Republican President Richard Nixon visited China in 1972. In many ways, the Chinese communist leaders seemed to feel more comfortable with the conservative Republican occupants of the White House than with liberal Democratic presidents.
Deconstructing the communist mindset in Beijing, one discovers an elite-based (if not conspiratorial) interpretation of US politics. The Republicans are seen as the party representing the interests of Wall Street and the Pentagon. These people manage US foreign policy based on what's good for business and the hardcore interest of the state. And they are just the kind of American politicians Chinese leaders - whose own foreign policy is driven by mercantilist and realpolitik concerns - prefer to do business with.
Liberal democratic administrations, on the other hand, tend to be more responsive to the political pressures coming from their traditional constituencies (trade unions, human rights groups and environmental organisations) who demand that interests of American workers and Chinese human rights activists be placed on the top of the bilateral Sino-American agenda. This makes it difficult for Washington to do diplomatic and business deals over spheres of influence and market shares with Beijing.
So it was not surprising that there were clearly serious concerns in Beijing that Mr Obama, whose supporters included some of the leading figures and organisations associated with the progressive wing of the Democratic Party - human rights advocates for the Dalai Lama and Chinese dissidents; trade unions blaming Chinese for 'stealing' American manufacturing jobs - could end up embracing a more confrontational approach towards Beijing.
That Mr Obama had threatened to 'take China to the mat' over its refusal to revalue its currency against the US dollar - critics of China in Washington believe an undervalued yuan is the main reason for the rising US trade deficit with China - may have helped create the impression that Mr Obama would end up launching a trade war against China.
Former Democratic president Bill Clinton had resisted that kind of aggressive trade approach towards China during the booming era of the 1990s. Instead, under the influence of his centrist economic advisers - two of whom (Tim Geithner and Larry Summers) joined the Obama administration - Mr Clinton pursued a policy of economic engagement with the Chinese, supporting their accession into the World Trade Organization (WTO).
But the global economic crisis that helped Mr Obama win the White House created new political conditions under which growing anti-globalisation sentiment among Americans could strengthen the hands of those Democrats urging the president to act tough with Beijing over its economic policies.
At the same time, there was not a lot of excitement among the Chinese over the candidacy of Republican John McCain with his proposed 'League of Democracies' that would have excluded China. Moreover, Mr McCain and his neoconservative advisers seemed to represent an extension of the unilateralist approach to foreign policy that ex-president George W Bush had adopted during his first term in office.
Many of these same neo-conservative aides urged Mr Bush to pursue a policy of containing China, which they described as America's primary post-Cold War enemy. But after 9/11, Washington seemed to be shifting its attention from China to terrorism. Mr McCain, however, stressed that while he would not attempt to prevent China from achieving great power status, he would still maintain a US military presence in East Asia, and strengthen ties with Japan and other Asian countries.
Yet in November 2008 the chances of a geostrategic confrontation between China and the US under a President McCain seemed remote, while the potential for economic tensions between the two powers under President Obama was seen as a more realistic concern.
But during the first weeks of his administration, Mr Obama seemed to be resisting the pressure to get tough with the Chinese. He and his aides rejected the idea of turning the issue of China's undervalued currency into a central component in the relationship with Beijing, arguing that at a time when (through its purchase of US dollar-denominated financial instruments) China continued to finance the huge US deficit - the US owes China about US$800 billion - growing economic tensions between Washington and Beijing could put downward pressure on the US currency and threaten the American and global economic recovery.
In what critics have described as the Obama policy of 'appeasing' China, the US president refused to meet with the Dalai Lama before leaving for his first visit of China. Moreover, Mr Obama also refrained from placing too much emphasis on US criticism of Chinese human rights conduct in the way that ex-president Clinton had done during his trips to China. And with the exception of imposing tariffs on Chinese tyres, there have been no indications that the Obama administration was planning to confront the Chinese over their economic policy.
Critics argued that Mr Obama's efforts to engage the Chinese were helping to accentuate the waning of America's geostrategic and economic power in East Asia as it faces a more assertive China. Obama administration officials countered that the new president was trying to readjust American power to the new political and economic realities by building a cooperative relationship with Beijing that was necessary in order to maintain US interests and global stability.
Observers have even started talking about the formation of a so-called G-2 - a Sino-American geostrategic duopoly - that was evident at last December's Copenhagen climate summit during which US and Chinese leaders helped determine the outcome of the gathering.
But Copenhagen also highlighted the differences between the positions of the two powers over a variety of issues, while the outcome of the earlier G-20 summit in Pittsburgh raised growing doubts about the willingness on the part of both governments to take the necessary steps in order to deal with the global financial imbalances (rising American spending versus growing Chinese savings) that may have been responsible for the financial meltdown that devastated the entire global economy.
The debate between the Chinese and the Americans on how to fix these global imbalances - the Chinese urging the US government to stop spending and printing so many dollars; the Americans continuing to demand that the Chinese revalue their currency as a way of helping to open its market to American imports - could have remain unresolved as long as both their economies seemed to be experiencing the pains of the Great Recession.
But when it looked as though the Chinese were heading towards a vigorous economic recovery while the Americans were still dealing with large unemployment despite a slow but steady economic recovery, political pressure was growing in Washington to 'do something' about China.
The Republican victory in the special Senate election in Massachussetts that reflected the growing economic anxiety among Americans (as dramatised in the increasing influence of the populist Tea Party movement) has forced Mr Obama to try to co-opt the populist message by asserting his commitment to protect Main Street from Wall Street as well as from ravaging competition from other leading economies, with China topping the list.
He announced during his recent State of the Union address that he was going to pursue an aggressive trade policy aimed at doubling US exports and creating 2 million trade-related jobs in the next half-decade. Framing that trade strategy as part of a wider effort of restructuring and strengthening the American economy, Mr Obama declared that 'I do not accept second place for the United States of America' - a clear reference to China and to the recognition that unless the US-China trade gap was addressed, it would be impossible to achieve the goal of 2 million new trade-related jobs.
And in an ensuing meeting with Democratic senators last week, Mr Obama stressed that his administration would be 'putting constant pressure on China and other countries to open up their markets', adding that 'one of the challenges that we've got to address internationally is currency rates and how they match up'. Any artificially undervalued currency 'puts us at a huge competitive disadvantage', he said. Mr Obama's aides have emphasised that Treasury Secretary Timothy Geithner as well as Commerce Secretary Gary Locke were going to put more emphasis on the need for a change in China's currency policy.
And Democratic and a few Republican lawmakers are threatening that unless the Chinese take moves to revalue their currency, Congress is going to adopt proposed legislation to punish the Chinese for their behaviour.
'Having China as a banker is not good for the US economy; it is not good for US global leadership; it is not good for US national security,' Mr Obama said during the election campaign. 'History teaches us that for a nation to remain a pre-eminent military power, it must remain the pre-eminent economic power,' he stressed - which could turn out to be his new manifesto for American renaissance.
On top of the economic tension, there are strains between the two countries over American plans to go ahead with the proposed US$6.4 billion arms sales to Taiwan, and China's continuing refusal to support American-led proposals to sanction Iran over its alleged nuclear military programme.
It becomes quite clear that amid difficult economic ties and growing concerns about America's global pre-eminence, China has emerged as a convenient target for Democrats and Republicans - not to mention the angry Tea Partyers. In fact, bashing China could soon become the only policy issue that could bring all Americans together.
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