Business Times - 03 Dec 2011
Romney's dangerous anti-China rhetoric
Accusing Beijing of manipulating its currency and stealing US jobs is not based on any sound economic policy and everything to do with electoral politics
By LEON HADAR
AS the US presidential and congressional election campaigns are getting started, no one should be surprised that both Democrats and Republicans have been doing a lot of China-bashing. After all, the economically distressed American voter is in a very angry mood, blaming the Wall Street elites and the Washington bureaucrats for the nation's economic mess, and ready to listen to a populist message that fuses nationalism, xenophobia and protectionism. And according to recent opinion polls, a majority of Americans believe that China is intent on - and will succeed in - supplanting the US as the world's leading economic and geopolitical power.
In this political environment, scapegoating China for destroying US manufacturing and stealing American jobs seems to be a cost-effective strategy for any politician running for office in 2012. That explains why a bipartisan coalition of lawmakers has crafted legislation aimed at punishing the Chinese for allegedly manipulating their currency in order to make its exports more globally competitive against American products. Or why the leading Republican presidential candidates as well as President Barack Obama are sharpening their criticism of Chinese policies - not unlike the way Chinese politicians try to win public support by promoting anti-American nationalist themes.
Yet the extent to which the former Massachusetts governor and investment banker Mitt Romney, who is most likely to be nominated as the Republican presidential candidate next year, has been playing the 'blame China' card and has been accusing Beijing of exploiting its weak currency, the renminbi, to steal American jobs has been quite perplexing.
'China is on almost every dimension cheating,' Mr Romney insisted during several presidential debates. 'We got to recognise that,' he stressed. 'They're manipulating their currency and by doing so they're holding down the price of Chinese goods and making sure their products are artificially low-priced,' Mr Romney explained, adding: 'It's predatory pricing. It's killing jobs in America.'
And responding to criticism from another Republican presidential candidate, former ambassador to China and Singapore Jon Huntsman, Mr Romney sounded as though he was relishing a fight with the Chinese. 'I'm afraid that people who've looked at this in the past have been played like a fiddle by the Chinese,' he said. 'And the Chinese are smiling all the way to the bank, taking our currency and taking our jobs and taking a lot of our future. And I'm not willing to let that happen.'
Mr Romney is a member of a political party that since the administration of President Ronald Reagan has placed the advancement of global free trade at the centre of its economic and foreign policies. Moreover, Mr Romney, a former business executive who has worked and travelled extensively abroad, belongs to the internationalist wing of the Republican Party that for years has been successfully containing pressure from the more isolationist and protectionist forces of the party.
In fact, the one piece of good news coming out of Washington in recent months has been the cooperation between President Obama and the Republican Congressional leaders in winning support on Capitol Hill for the approval of three free trade accords, including with South Korea, despite opposition from labour unions affiliated with the Democratic Party and the Republican lawmakers with ties to the populist Tea Party movement.
Indeed, as far as the Republican leaders and their allies in the business community were concerned, there was nothing to criticise and a lot to applaud about the more energetic Pacific-centred trade liberalisation agenda that President Obama had unveiled when he hosted the APEC Leaders Summit in Honolulu, Hawaii, and during his visit to Australia and Indonesia in November.
And yet, a senior adviser to Mr Romney went on to blast the White House's trade policies, suggesting that President Obama was 'treated as a doormat' by China. Indeed, the Romney campaign has turned China's currency policy into a central component of the candidate's speeches and television commercials, arguing that if elected, Mr Romney would force China to appreciate its currency which would lessen the advantage for Chinese exporters and allow US manufacturers to expand and create more jobs.
Rejecting the accusations that such policies would lead to a trade war with China, Mr Romney responded that he was not declaring a trade war on China. 'We are already in a war,' he declared. He also said that he would label China a manipulator on his first day in office, and that he would impose tariffs on Chinese imports to the US if China continued with its currency policy. (In reality, a US president needs Congressional approval for any trade sanctions.)
As a graduate of the Harvard Business School and with a long-time experience in managing global businesses, Mr Romney probably recognises that China's policies are not responsible for American unemployment and that the economic case for further appreciation of the Chinese currency is weak.
Hence, the gradual appreciation in the value of the renminbi has had almost no effect on the size of US trade deficit with China.
Moreover, while the appreciation in the value of the renminbi could make Chinese exports to the US more expensive, it does not help bring jobs back to the US. Instead, low value-added manufacturers will relocate their operations from China to countries like Vietnam; and these low-cost products will continue to compete with American exports.
But Mr Romney's China-bashing rhetoric is not driven by the advice of economists. It is Mr Romney's political advisers who have concluded - and rightly so - that there is nothing remotely populist in their candidate's political and professional background and persona. If anything, Mr Romney looks and sounds like your friendly investment banker, which was what he was. As a top executive in the Boston-based Bain Capital, Mr Romney made a fortune by buying floundering firms at low cost, stripping away any parts that were not profitable and laying off excess workers. At a time when the American public seems to be responsive to the message of the Occupy Wall Street movement, Mr Romney is bound to be seen by voters as a member of the wealthiest one per cent of Americans.
And since Mr Romney and the leaders of the Republican Party continue to oppose increasing the tax burden on wealthy Americans like Mr Romney - while calling for reducing government support for retirement and health-care insurance programmes - the leading Republican candidate is clearly not in a position to market himself to the 99 per cent of Americans as a Man of the People.
Which brings us back to China. Campaigning in swing states such as Ohio, Michigan and Pennsylvania with their eroding manufacturing base and high unemployment rates, Mr Romney is hoping that his tough message on China - and blaming President Obama of 'appeasing' China on the issue of its undervalued currency - would help him win the vote of angry blue collar workers.
But Mr Romney is not campaigning in a global economic vacuum. By pressing President Obama to label China a currency manipulator, a step that the administration has been unwilling to embrace because they worry that it would provoke Beijing to retaliate, Mr Romney could affect the political and legislative debate in Washington.
The US Senate has already passed a bill that called for labelling China as a currency manipulator. Sixty-three Senators voted for the bill, including 16 Republicans. But in the House of Representatives, opposition from Republicans has slowed the momentum of supporters of a similar legislation. But Mr Romney's anti-China stance could help tip the balance in the Congressional debate over whether to impose sanctions on China.
Not unlike other presidential candidates who had bashed China during their election campaigns, Mr Romney would probably move in the direction of economic engagement with China after getting elected to office. But meanwhile, his irresponsible rhetoric on the issue raises doubts about whether he should be elected.
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