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Obama to press Asia on trade : Urging China to buy more U.S. exports while its focus is on its own economic revival may be a challenge.

November 13, 2009|Don Lee and David Pierson

WASHINGTON AND BEIJING — On the eve of his first Pacific trip since entering the White House, President Obama signaled Thursday that he would press Asian leaders to open up their markets and boost purchases of U.S. goods instead of relentlessly focusing on exporting more and more to American consumers.

In remarks made before leaving Washington on the seven-day, four-nation trip, the president suggested that Asia must do more to "rebalance" the global economy by accepting more U.S. imports, increasing its own domestic consumption and relying less on Americans as buyers of last resort.

In part, Obama's remarks were aimed at reassuring a domestic audience that is struggling with double-digit unemployment. But they come as China, Japan and other countries on his itinerary are emerging from downturns of their own, and where the prospect of throttling back their economies to help the U.S. won't be popular.

"I think he's going to face a very, very tough reception on this" part of the mission, said Drew Thompson, director of China Studies at the Nixon Center, a think tank in Washington.

In China, which is at the center of his journey, policymakers have for years acknowledged that a shift toward more domestic consumption will help reduce the nation's reliance on foreign markets and give other countries a greater share of trade.

The problem is such reform requires lifting financial and political controls that China's rulers are in no rush to surrender.

Among them is a chief sticking point, the Chinese currency, which has long been seen as undervalued. Beijing has pegged the yuan to the dollar since the financial crisis began and it has recently sunk with the declining greenback, making China's exports even more attractive. This has given China a larger share of exports even though exports as a whole worldwide have shrunk.

Not surprisingly, American manufacturers aren't happy. They scored a major victory when Obama imposed tariffs on cheap Chinese tires in September. And last week, the U.S. imposed duties on Chinese steel pipes. China has responded by launching probes of U.S. auto parts and chicken.

The significance of the spats may be more symbolic, however, amounting to only a fraction of the $212 billion in trade the two countries shared this year. Obama has said he will discuss the Chinese currency, but he also will need to assure the Chinese that there is no protectionist strategy emanating from Washington.

"There has been real disappointment about the Obama administration on trade," said Liu Baocheng, a professor at the University of International Business and Economics in Beijing. "We expected more positive proposals to strengthen the economic relationship."

Beijing will also want assurances that the president will control inflation, and thus not jeopardize its $797-billion investment in U.S. treasuries.

Obama was careful not to label China a manipulator of its currency last month, and there are signals that the yuan may appreciate. A Chinese central bank report released Wednesday hinted that it might consider other financial trends in determining the value of the currency. Analysts are expecting a modest hike sometime next year.

"I think this colors everything" said Oded Shenkar, a management professor at Ohio State University and author of "The Chinese Century," referring to U.S. foreign debt.

"We don't want the Chinese to stop buying our bonds," Shenkar said. "This is where the domestic agenda and printing a lot of money and taking on enormous debt meets with the foreign agenda. Historically, countries that are struggling with financial debt had problems projecting global power."

Senior White House aides have downplayed expectations of breakthroughs or tangible "deliverables" from the trip, which will begin with a speech in Tokyo on Saturday and include the 21-member Asia-Pacific Economic Cooperation summit.

Sen. Dianne Feinstein (D-Calif.) sees Obama's trip as a vital part of securing U.S. interests. "China is a dynamic country on the rise . . . and it needs to be understood," she said. "I think President Obama can have an enormously beneficial impact on this relationship."

Although some analysts say Sino-U.S. relations are as strong as they've ever been, deep mistrust lingers, especially over military and economic interests. That uneasiness may be all the greater since Obama, as analysts expect, will deliver a strong message that the U.S. intends to keep playing a major role in the region.

China's neighbors, however haltingly and uneasily, are responding to the gravitational pull of the Middle Kingdom, which is moving toward levels of economic and military strength not enjoyed by Beijing in more than a century.

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