Page 1 of 2 Obama's collision course with China
By Benjamin A Shobert
In the past several weeks, two Congressional Commissions - the
Congressional-Executive Commission on China (CECC) and the US-China Economic
and Security Review Commission (USCC) - have submitted reports on China that
are likely to serve as indicators of what we may expect from an Barack Obama
administration. Given the state of the American economy, Obama's direct
comments about China have been limited, and usually presented as secondary, to
other domestic priorities.
One of the president-elect's greatest strengths is an ability to be diffuse
until he needs to take a public position, which allows others to project onto
him their own agendas and thoughts; this is
perhaps nowhere more visible than in his policy positions towards US-China
relations.
Given the limited nature of his direct comments concerning China, Obama's
October position paper to the American Chamber of Commerce serves as an
important insight into the issues that will guide his administration's
engagement with Beijing. The October policy statement had four themes in common
with both Congressional Commissions' reports: China's role in negotiating with
North Korea, the need for China to change its currency practices, concern over
China's foreign-bound investment in key sectors, and product safety issues. In
Washington, when areas of concern overlap between the executive and legislative
areas, we can expect that such commonalities provide insight into what policy
changes to expect from an Obama administration.
Both commissions serve as reporting entities to Congress and as a result
provide a sense of the concerns that will directly influence the upcoming
legislative session and indirectly shape Obama's. One, the CECC's, emphasizes
rule of law and human rights matters within China; the other, the USCC's, looks
at potential national security concerns unique to China. The latter has
traditionally been more hawkish, and to its credit, appears to have found a
more balanced tone this year.
But Beijing's alarmist and heavy-handed responses to potential publicity
problems at the Olympics heavily influenced the CECC's report, whose report
took a more concerned tone:
Chinese authorities failed to fulfill
several Olympics-related commitments - including commitments to press freedom,
media access, the free flow of information, and freedom of assembly. The
Chinese government's and Communist Party's continuing crackdown on China's
ethnic minority citizens, ongoing manipulation of the media, and heightened
repression of rights defenders reveal a level of state control over society
that is incompatible with the development of the rule of law.
In
the short term, the Obama administration is unlikely to elevate these issues in
no small part because of the president-elect's own concerns over the US's
recent detainee actions during the Bush Administration. Incidents like Abu
Ghraib, coupled to the fundamental rule of law questions posed by the American
government's extraordinary rendition program, make the CECC's criticisms of
China's "black jails" not really actionable. The CECC's description of such
facilities as "secret jails [that] exist entirely outside the legal system"
makes for an uncomfortable comparison to actions taken by the American
government in its "war on terror".
Knowing this, the Obama engagement with China on human rights' issues is likely
to follow the same tone of previous administrations - calling attention to the
problems, urging reform, but still absent of meaningful consequences.
However, the much hoped for pragmatism of Obama's foreign policy may find an
early opportunity with respect to China and North Korea: Obama's October policy
paper positively noted China's contribution at the six-party talks with North
Korea, and his Council on Foreign Relations statement on Pyongyang's nuclear
programs made note of the need to be more "aggressive" with diplomatic
engagement. Even while sounding a note of concern about China's inconsistent
adherence to non-proliferation agreements, the USCC report positively echoed
Obama's statement on North Korea, saying: "China's support for multilateral
negotiations with North Korea can help to reduce tensions on the Korean
Peninsula, open North Korea to dialogue, and improve bilateral relations." Next
to a plan for withdrawing from Iraq, few things would more strongly signal
Obama's sensibility, influence and the end of the Bush-era than moving North
Korea off of the "Axis of Evil" through diplomatic partnership with China. It
would also create an opportunity for goodwill between Washington and Beijing in
the midst of what is likely to be a turbulent relationship due to deteriorating
economic conditions.
Of more predictable influence on Obama are those policies suggested by the USCC
that have ramifications for the national economy. For quite some time, this
commission has vocalized concerns that China's currency manipulations create an
unfair competitive advantage that is, in no small part, why many Chinese
exporters can sell products into North America and Europe at lower raw material
costs than domestic manufacturers. Action on this complaint has been largely
rhetorical, with a few legislative actions like the 2007 Fair Currency Act
threatening retribution, but thus-far these have stopped short of becoming law
due to lack of support from the president. This is very likely to change in an
Obama administration.
The profound economic crisis now facing America will, through its very
intensity and severity, alter the course of economic policy making within the
Obama administration and is likely to elevate China's currency practices as
something the president-elect can act on to alleviate the pain felt by American
companies. Obama spoke directly to this question in October when he said:
China
must change its currency practices. Because it pegs its currency at an
artificially low rate, China is running massive current account surpluses. This
is not good for American firms and workers, not good for the world, and
ultimately likely to produce inflation problems in China itself. As President,
I will use all the diplomatic avenues available to see a change in China's
currency practices.
This statement by Obama can be coupled to
the USCC's report which says that because of China's selective choice of which
economic reforms to implement, the country's leadership " ... continues to
control tightly the value of its currency ... at an artificially low rate by
means of strict capital controls. This violates the spirit and the letter of
International Monetary Fund bylaws." Taken together, both the USCC and the
Obama administration seem to be signaling to China that currency practices will
be a point of diplomatic and legislative action over the next four years.
Possible actions range from filing a formal grievance with the World Trade
Organization on China's currency policy or enacting punitive tariffs on Chinese
goods exported to the US.
In addition to an emphasis on currency policy, it is anticipated that Obama
will be more aggressive in efforts to increase oversight by the Food and Drug
Administration (FDA) and United States Department of Agriculture (USDA) on
Chinese food and drug exports to the US. The current tone in America seems to
favor regulation as a response to problems in both financial institutions as
well as high-value export markets, and China is likely to feel the weight of
American dissatisfaction with defective and unsafe products through increased
oversight.
The USCC recommends several changes to current policy in these areas which
Obama is unlikely to resist, including the elimination of "port shopping" - a
practice where the FDA rejects a shipment but then must "relinquish ... to the
shipper" only to have the shipment brought to another American port in the
hopes of lax inspection. In an attempt to prevent these type of situations, the
FDA currently has plans to open eight FDA offices in China,
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