Tuesday, October 11, 2011

The preferred villain of US politicians on the make

Business Times - 11 Oct 2011


The preferred villain of US politicians on the make

By LEON HADAR
WASHINGTON CORRESPONDENT

TAKING swipes at China has been a Washington pastime for years. China's growing economy and its military assertiveness at a time when the foundations of American economic power and geo-strategic pre-eminence are eroding make it a convenient scapegoat for Democrats and Republicans. They accuse the Chinese of stealing American jobs and threatening US military interests in East Asia, hoping to appeal to the distressed voter (never mind that America's economic problems have very little to do with China and that the US continues to outspend and outperform in the military arena).

But every time tensions in Sino-US relations seemed to be getting out of hand you could depend on the countervailing forces of American businesses, the free traders on Capitol Hill and the 'grown-ups' in the White House and the Senate (considered to be a less populist and more deliberative body than the House of Representatives) to contain the China-bashing politicians and interest groups and to defuse any potential crisis with the Chinese.

That does not seem to be happening this time. In fact, it is the Senate that is leading an effort aimed at punishing China for allegedly manipulating its currency. All the signs are that the campaign of Senator Charles Schumer, a Democrat from New York, is gaining Congressional support. The Senate has advanced legislation to punish countries (read: China) that manipulate their currencies to gain a trade advantage over other countries (read: US).

The Bill that will compel the Obama administration to impose tariffs and other penalties against China and other countries for having 'misaligned' currencies is expected to be passed by the Senate next week, and it has a better- than-even chance of being approved by the Republican- controlled House. And this time the signs are that the members of the pro-free trade coalition on Capitol Hill have not been able to counter the drive to punish the Chinese. Even more significant, neither President Barack Obama nor the leading Republican presidential candidate who hopes to replace him in 2013 - former Massachusetts Governor Mitt Romney - are ready to campaign against the Bill. In fact, it seems that both men are jumping on the anti-China bandwagon.

Mr Obama has accused China of manipulating its currency and ordered US Trade Representative Ron Kirk to lodge a complaint in the World Trade Organization (WTO), alleging that China may be violating global trade rules with government subsidies to some of the country's clean energy businesses. 'China has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States,' Mr Obama said last week.

Meanwhile, Mr Romney promised during a recent Republican presidential debate that he would designate China as a 'currency manipulator' and impose trade sanctions if he is elected president. Taking into consideration that Republicans tend to portray themselves as free traders, it was interesting that former US Ambassador Jon Huntsman was the only Republican presidential candidate who criticised Mr Romney's proposal, warning that 'now is not the time, in a recession, to enter a trade war'.

But some Republican politicians, including lawmakers representing districts in the South and the Midwest where industries face tough competition from foreign companies and where the rate of unemployment is high, seem to be welcoming a trade war with China. Indeed, 12 Republican senators resisted pressure from the pro-business Congressional leadership of their own party and joined a Democratic majority last Thursday in voting to proceed with Mr Schumer's proposed legislation.

There are also signs of a growing rift among Republicans in the House of Representatives where Speaker John Boehner has been trying to scuttle attempts to bring a version of the Senate Bill for a vote. And it is not clear that Mr Boehner will be able to contain the anti-China sentiment of populists in his party, including the 99 Republicans who joined most Democrats in September√É‚ in backing a similar legislation.

While many Republicans affiliated with the Tea Party describe themselves as strong proponents of free market principles, they seem ready to buck pressure from their leaders and pro-business lobbyists on the issue of China.

Against the backdrop of the anti-Wall Street demonstrations by left wing groups in New York and other parts of the country, and the continuing influence of the Tea Partiers, China could emerge as one of the preferred targets for populists on the political right and left. The White House and Congress, Democrats and Republicans, all seem set to raise the ante in the current Sino-American dispute, marginalising the few remaining 'grown ups' who are trying to diffuse it.

Indeed, China is now set to become a favourite villain for every US politicians on the make.

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