Setting Priorities

CHINA WATCH
http://www.nationaljournal.com/congressdai...100510_2299.php


Setting Priorities
Monday, May 10, 2010

When President Obama was campaigning for the White House, he rarely mentioned trade -- or
China. Some pundits speculated he just wanted to avoid two thankless issues that might cost him
support from his Democratic base. Others took the omissions as a sign that trade and China
would receive low priority if he won. Both views have proven right.

Although Obama has continued -- and broadened -- the high-level U.S.-China talks started by
former President George W. Bush, he hasn't spelled out what America's medium- and long-term
goals would be with China. His plan for promoting more U.S. exports worldwide still is pretty
sketchy and doesn't address China directly.

To be sure, Bush didn't spell out specific priorities on China either, but the situation was different.
In Bush's early years, China hadn't built up the outsized trade surpluses it has now; the U.S. and
global economies were stronger; and Bush was trying to nudge Beijing into becoming a regular
player in global diplomacy.

Today the U.S.-China trade imbalance is huge, and America's recent financial and economic
collapse helped spur China into becoming more assertive, even belligerent. Meanwhile, Beijing
has been honing an old-style industrial policy that favors Chinese firms, penalizes foreign
companies and impedes imports of U.S. goods.

Moreover, domestic pressure to tackle America's trade problems is mounting, both among
business and labor. Obama has slapped penalties on Chinese-made tires and other products.
U.S. firms in China have begun complaining about Beijing's latest steps to make operating there
more difficult.

"There's a lot of uncertainty about the future" among U.S. companies in China, says Christian
Murck, president of the American Chamber of Commerce in China, which sent a delegation to
Washington last week.

Obama's isn't the only administration to fail to set firm priorities for what it wants in negotiations
with other countries. Few presidents hammered out coherent trade policies. The Reagan
administration did and launched the Uruguay Round of global trade talks, which broke new
ground in reducing trade barriers.

George H.W. Bush's administration made a detailed study of U.S. trade frictions with Japan, set a
series of goals and benchmarks and pursued them persistently, reaping tangible gains through
lengthy and complex negotiations. It also pressed other Asian countries to reduce trade
restrictions.

So far, the Obama administration has been busy trying to put out fires, tamping a U.S.-China rift
earlier this year that threatened bilateral relations. Under pressure from Congress, Obama
pressed Beijing to let the value of it's currency rise, ostensibly to help the trade imbalance.
Opinion is mixed on what impact that may have.

Obama's newly unveiled national export-promotion initiative doesn't apply solely to China, but
economists doubt how much it can accomplish. Taxing U.S. companies on their overseas
earnings, as Obama wants to do, won't help spur U.S. jobs, analysts say; it may even prompt
some multinationals to move offshore entirely.

There's also growing concern about the nontariff barriers that China keeps erecting to impede
foreign businesses -- such as special regulations that make it difficult for foreign companies to
compete for government procurement contracts, meet requirements to sell their products in China
and protect proprietary technology.

The Brookings Institution's Barry Bosworth suggests cutting the U.S. corporate tax rate -- already
higher than the average for most big countries -- to give U.S. manufacturers an incentive to
produce more at home. He says Washington also should be pressing China to cut tariffs,
particularly on the large capital goods America exports.

Bosworth argues the United States should focus less on the problems U.S. firms are
encountering in China and push to get China to buy more U.S.-made goods. "The
administration's biggest challenges are to rebalance the U.S.-Chinese trade picture and to create
jobs," Bosworth says. "Increasing U.S. exports abroad translates into jobs at home."

Obama has knowledgeable lieutenants well-versed in the economic and trade problems the
United States faces with China: Lawrence Summers, director of his National Economic Council;
Treasury Secretary Geithner, and Jeffrey Bader, a China hand who is chief Asia strategist on the
National Security Council.

But Summers and Geithner have focused primarily on domestic economic problems. And Trade
Representative Kirk is new to the subject, and his agency has played a secondary role in
negotiations with China. There's been no one to set the agenda, as USTR did during the Reagan
and elder Bush's administrations.

Grant Aldonas, a former U.S. trade negotiator who served as undersecretary of Commerce during
the younger Bush's administration, says the Obama team needs to set its priorities as quickly as
possible. The next meeting of the high-level U.S.-China Strategic and Economic Dialogue,
scheduled for late July, may be a place to start.

"You have to know what you want before you can get very far in negotiations with the Chinese,
and that presupposes a strategic vision of the U.S. role in the global economy," Aldonas says.
"That's something the administration plainly lacks."

by Art Pine

Monday, May 10, 2010
http://www.commongroundcommonsense.org/for...howtopic=119213