Tag: China

Obama’s First 100 Days: Mixed Record on Foreign Policy

Cato foreign policy experts weigh in on President Obama’s record in his first 100 days:

Christopher Preble, Director Foreign Policy Studies:

President Obama deserves credit for making a few modest changes in U.S. foreign and defense policy, and he has signaled a desire to make more fundamental shifts in the future. Some of these may prove helpful, while others are likely to encounter problems. In the end, however, so long as the president is unwilling to revisit some of the core assumptions that have guided U.S grand strategy for nearly two decades – chief among these the conceit that the United States is the world’s indispensable nation, and that we must take the lead in resolving all the world’s problems – then he will be unable to effect the broad changes that are truly needed.

Ted Galen Carpenter, Vice President Defense & Foreign Policy Studies; Christopher Preble:

On the plus side, Obama moved quickly to fulfill his most important foreign policy promise: ending the war in Iraq. That said, the policy that his administration will implement is consistent with the agreement that the outgoing Bush administration negotiated with the Iraqis. Given that the war has undermined U.S. security interests, and our continuing presence there is costly and counterproductive, Obama should have proposed to remove U.S. troops on a faster timetable.

Malou Innocent, Foreign Policy Analyst:

The jury is still out on the other major, ongoing military operation, the war in Afghanistan. That mission is directly related to events in neighboring Pakistan, which is serving – and has served – as a safe haven for Taliban supporters for years. President Obama deserves credit for approaching the problem with both countries together, and also in a regional context, which includes Iran, as well as India. Still unknown is the scope and scale of the U.S. commitment. President Obama has approved a nearly 50 percent increase in the number of U.S. military personnel in Afghanistan. Some have suggested that still more troops are needed, and that these additional troop numbers might prevail for 10-15 years. That would be a mistake. The United States should be looking for ways to increase the capacity of both Afghanistan and Pakistan to confront the extremism in their countries, and should not allow either to grow dependent upon U.S. military and financial support.

Christopher Preble and Ted Galen Carpenter:

On Iran, President Obama made the right decision by agreeing to join the P5 + 1 negotiations, but that is only a first step. The two sides are far apart and President Obama has not signaled his intentions if negotiations fail to produce a definitive breakthrough. Sanctions have had a very uneven track record, and are unlikely to succeed in convincing the Iranians to permanently forego uranium enrichment. If the Iranians are intent upon acquiring nuclear weapons, military action would merely delay Iran ’s program, and would serve in the meantime to rally support for an otherwise unpopular clerical regime, and a manifestly incompetent president.

Doug Bandow, Senior Fellow; Christopher Preble:

A related problem is North Korea’s ongoing nuclear program, an area where the president and his team seem to be grasping for answers. President Obama was mistaken if he believed that that the UN Security Council would render a meaningful response to Pyongyang’s provocative missile launch. It was naive, at best, for him to believe that even a strong rebuke from the UNSC would have altered Kim Jong Il’s behavior. The president must directly engage China, the only country with any significant influence over Kim. The North’s reckless and unpredictable behavior does not serve Beijing’s interests.

Benjamin Friedman, Research Fellow; Christopher Preble:

Obama and Defense Secretary Robert Gates are correct to apply greater scrutiny to bloated Pentagon spending, and to terminating unnecessary weapon systems, but the budget will actually grow slightly, at a time when we should be looking for ways to trim spending. If President Obama decided to avoid Iraq-style occupations, we could cut our ground forces in half. If we stopped planning for near-term war with China or Russia, the Air Force and Navy could be much smaller. Unless we commit to a grand strategy of restraint, and encourage other countries to provide for their own defense, it will be impossible to make the large-scale cuts in military spending that are needed.

Jim Harper, Director of Information Policy Studies; Benjamin Friedman; Christopher Preble:

Two other quick points. President Obama has moved away from some of the overheated rhetoric surrounding counterterrorism and homeland security, including dropping the phrase ‘War on Terror”. This was the right approach. The language surrounding the fight against terrorism is as important – if not more important – than the actual fight itself. Equally useful is his pledge to close the detention facility at Guantanamo Bay and his renunciation of the use of torture and other illegal means in the first against al Qaeda. These steps send an important message to audiences outside of the United States who cooperation is essential.

Ian Vasquez, Director, Center for Global Liberty & Prosperity; Juan Carlos Hidalgo, Project Coordinator for Latin America.

President Obama has signaled a slight change on US-Cuba policy by softening some travel and financial restrictions. It is not as far as we would have liked, but it is a step in the right direction – toward greater engagement, as opposed to more isolation, which was the approach adopted by the Bush administration.

For more research, check out Cato’s foreign policy and national security page.

The Chinese Currency Issue Is No Longer

In its first statutory, semi-annual report on foreign currency practices, the Obama Treasury Department refrained from designating China a “currency manipulator,” further affirming the view that an aggressive, sticks-only approach to the bilateral trade relationship advocated (mostly) by campaigning politicians is simply untenable. After serving more than 5 years as a great source of bilateral trade tension, the Chinese currency issue is dead.

Senator Obama and presidential candidate Obama both talked tough about Chinese currency practices, identifying an undervalued yuan as a source of unfairness to U.S. producers and an important cause of the bilateral trade imbalance. Treasury Secretary-designate Geithner, during his confirmation hearing in January, reiterated President Obama’s commitment to dealing with the issue before the Senate Finance Committee:

President Obama - backed by the conclusions of a broad range of economists – believes that China is manipulating its currency. President Obama has pledged as President to use aggressively all the diplomatic avenues open to him to seek change in China’s currency practices. While in the U.S. Senate he cosponsored tough legislation to overhaul the U.S. process for determining currency manipulation and authorizing new enforcement measures so countries like China cannot continue to get a free pass for undermining fair trade principles.

Those who relied on hyped-up media accounts of Geithner’s testimony, which generally homed in on the terms “aggressively,” “tough,” and “enforcement” in the above passage to imply that Obama would take action against China on this matter, are probably utterly surprised that Treasury balked yesterday. But those who read the rest of Geithner’s response to the question may have noticed this broad canvas for inaction:

The question is how and when to broach the subject in order to do more good than harm. The new economic team will forge an integrated strategy on how best to achieve currency realignment in the current economic environment.

Those last two sentences of Geithner’s response contained the answer—nearly three months beforehand—to the question of whether Treasury would label China a manipulator. And, taken in its entirety, the response is a perfect summation of the distinctions between criticizing policy as a challenger and being responsible for policy as the guy in charge. You can talk tough as a challenger because you don’t have to account for the consequences of your actions. But when you are responsible for the consequences of potentially incendiary policy changes, circumspection is a rediscovered virtue.

As President Obama knows by now, the consequences of simply labeling China a “currency manipulator” (let alone attempting to do something remedial about it) would undermine broader U.S.-China relations, invite recriminations, inspire potentially adverse policy changes in China, and would inject heaps of uncertainty into global currency and financial markets. Besides, as yesterday’s Treasury report concludes, the yuan continues to appreciate against the dollar, the government’s accumulation of foreign reserves has decelerated, and policies are in place to encourage greater domestic consumption in China and to reduce the economy’s reliance on exports.

I remain hopeful that this distinction between Obama the president and Obama the candidate will become and remain evident in U.S. trade policy more broadly.

Freedom for Yang Zili

Congratulations to Yang Zili, a Chinese advocate for political pluralism and human rights who has been set free after serving eight years in prison.

As I noted in the Fall 2007 edition of Cato’s Letter, Yang was an admirer of the libertarian thinker F. A. Hayek and described himself as a political liberal. A computer engineer by trade, Yang quickly recognized the power of the internet to spread ideas, founding a website, the “Garden of Ideas” (www.lib.126.com), where he forcefully condemned communism and argued for democratic reforms. “I am a liberal,” he wrote, “and what I care about are human rights, freedom and democracy.” Yang also participated in a discussion group called the New Youth Society, where he discussed the potential for political reform in China with young people who were similarly passionate. In 2001, Yang Zili and three of his colleagues were jailed for conspiring to overthrow the Chinese Communist Party.

As the Washington Post reported in 2004, the small group met for only a few months, and during that time one of its members was reporting to the Ministry of  State Security. Indeed, the Post reported:

What happened to the New Youth Study Group offers a glimpse into the methods the party uses to maintain its monopoly on power and the difficult moral choices faced by those caught in its grip. The fate of the study group also illustrates the thoroughness with which the party applies one of its most basic rules of survival: Consider any independent organization a potential threat and crush it.

The eight members of the New Youth Study Group never agreed on a political platform and had no real source of funds. They never set up branches in other cities or recruited any other members. They never even managed to hold another meeting with full attendance; someone was always too busy.

And yet they attracted the attention of China’s two main security ministries. Reports about their activities reached officials at the highest levels of the party, including Luo Gan, the Politburo member responsible for internal security. Even the president then, Jiang Zemin, referred to the investigation as one of the most important in the nation, according to people who have seen an internal memo summarizing the comments of senior officials about the case.

Such is life in a police state.

Yang Zili spent eight years in prison for being brave enough to speak out against an authoritarian regime, which is 8 years too many in my book. Still, we can take comfort that he got out, and that his colleagues are slated to be released from prison next year.
Unfortunately, many young internet activists brave enough to stand up for freedom still languish in jail.

Too Much Hysteria about Trade

The World Bank issued a press release on Tuesday announcing the results of a study published March 2, which concludes that 17 of the 20 so-called G-20 countries have invoked at least some protectionist measures since pledging last November to avoid protectionism for at least one year.

Of course the Washington Post—which now specializes in printing run-of-the-mill stories about trade that rarely come close to justifying the sensational headlines, provocative subheads, or gripping leads — jumped all over the report as evidence that: “Trade Barriers Could Threaten Global Economy: World Bank Finds Protectionist Trend.”

Well, we all know that trade barriers do threaten the global economy — in times of economic expansion and contraction. But most of the measures cited in the report are not particularly spectacular or unusual from a trade perspective. For better or worse, most WTO member countries do have some latitude to raise trade barriers — sometimes unconditionally. But also, in any given year, governments institute policies that happen to have adverse affects on trade (even if the measure wasn’t intended to be protectionist).

Sometimes aggrieved interests in affected countries prevail upon their governments to protest or otherwise seek resolution. And more often than not, under those circumstances, resolution is achieved. But sometimes, a protectionist measure doesn’t even provoke any kind of protest. So, quantifying protectionist measures is one thing, but qualifying them is quite another, more important exercise, if one is interested in making judgments about protectionist trends.

The by-line of the WP story belongs to Anthony Faiola, who last week wrote story titled: “U.S. to Toughen Its Stance on Trade: New Policy Reflects Growing Dissatisfaction With Global Markets.” The lead paragraph of the story read:

The Obama administration is aggressively reworking U.S. trade policy to more strongly emphasize domestic and social issues, from the displacement of American workers to climate change.

But nothing in the story supports the assertion that anyone is “aggressively reworking U.S. trade policy.” Nothing supports the subhead that there is a growing dissatisfaction with global markets. Trade policy may be in for some changes simply because there’s a new sheriff in town, who is beholden (to what extent we shall see) to interests that oppose competition, but not because of dissatisfaction with global markets.

Certainly there is no evidence of dissatisfaction with global markets in the story, which was occasioned by Ron Kirk’s confirmation hearing as U.S. Trade Representative. Kirk testified—before a Senate that already has before it legislation to make enforcement, rather than negotiation, the priority of trade policy for the next couple years—that he intends to focus on enforcement, rather than negotiation. Well, duh! What else is a nominee whose fate depends on the blessing of the people who want more enforcement going to say? For the record, it’s been known for quite some time that the administration would focus on systematizing enforcement efforts, so that’s not really news.

What is newsworthy, however, are the parts of Ron Kirk’s testimony that went unrevealed in Faiola’s reporting. For example, Kirk said that “at an appropriate time and with proper congressional input and concerns addressed,” the administration would ask Congress to grant the president fast-track trade negotiating authority, which is a tool required only by presidents interested in negotiating and expanding trade.

Kirk also said that “We are mindful that the benefits of trade are diffuse, while its pain is often concentrated. It is within that context that we seek to restore and build new bipartisan support for a progressive trade agenda for America.”  Where, then, is the reporting that the Obama administration does not reject trade? Where is the headline that Obama seeks support for a progressive trade agenda? (Cato is publishing a paper next month by Scott Lincicome and me that explains how President Obama can help restore the pro-trade consensus, which includes a large section on the role the media has played in perpetuating destructive myths about trade and globalization).

Where is the reporting that Democrats in Congress are not all opposed to trade liberalization? Senate Finance Committee chairman Max Baucus told Kirk during the hearing: “I also want to find a way to begin consideration of the three pending trade agreements. We should start with Panama. That’s the agreement that’s most ready for action. And it’s the agreement that will win the greatest level of support.” Reporting on these matters would be newsworthy and constructive since so few in the media seem to be willing to publish stories that contravene conventional wisdom about trade.

The fact of the matter is that there isn’t any discernible trend toward protectionism in the United States or in the world right now. World leaders issue warnings about the consequences of protectionism, but there are not trends. There are incidences, but no trends. The ballyhooed World Bank paper cites 78 trade measures “proposed and/or implemented,” 66 of which involved trade restrictions, 47 of which eventually took effect. The long footnote associated with the presentation of these numbers (footnote 1) includes the following sentence: “It is important to note that it is difficult to distinguish the trade policy measures that are taken in response to the current crisis from measures that might have been taken anyway.”

Most of the 47 measures cited in the report happened in November and December of 2008, and Faiola already ranted about them in the WP on December 22, 2008:

Moving to shield battered domestic manufacturers from foreign imports, Indonesia is slapping restrictions on at least 500 products this month, demanding special licenses and new fees on imports. Russia is hiking tariffs on imported cars, poultry and pork. France is launching a state fund to protect French companies from foreign takeovers. Officials in Argentina and Brazil are seeking to raise tariffs on products from imported wine and textiles to leather goods and peaches, according to the World Trade Organization.

There may be nothing necessarily incorrect about the facts reported. But the tone and implications are possibly misleading. It is hard to accept the otherwise marginally significant facts without also accepting the provocative metaphors and sense of impending doom. Those actions have less antagonistic explanations and more benign interpretations.

For example, the actions of Indonesia, Argentina, and Brazil are consistent with their rights under the WTO agreements and will have a negligible collective impact on world trade. Russia is not even a member of the WTO and frequently behaves outside of international norms, so its actions have very limited representative value. And France has intervened to block foreign takeovers of French companies on other occasions this decade, so its actions are not particularly noteworthy.

At least the World Bank study is careful enough to report some of the positive trade developments and reasons for optimism that I discuss in more detail in this paper that Cato published last week. The World Bank notes 10 instances of trade liberalization around the world, which presumably includes Mexico’s admirable decision to reduce tariff rates on 70 percent of the products listed in its tariff schedule; Brazil’s decision to scrap tariffs on certain raw materials, components, capital goods; China’s decision to forego inclusion of Buy China provisions in its own massive spending bill; and the signing of new free trade agreements between Australia, New Zealand, and the ASEAN countries.

The WB study, like my paper, points out that the sturdy legal and institutional infrastructure of the GATT/WTO system combined with the fact of growing interdependence between countries that are now linked by transnational supply chains will likely diminish prospects for more consequential protectionist indulgences.

Of course Anthony Faiola is not the only person at The Washington Post guilty of hyping protectionist rhetoric and war metaphors in trade stories (and the WP is not the only media outlet engaging in hype). But one of the more egregious disconnects between headline/subhead/lead and the body of the story is found in an article on U.S.-China trade relations by Faiola’s colleague, Ariana Eunjung Cha (which is dissected and analyzed here).

World policymakers and policy watchers do need to be vigilant about ensuring that the world doesn’t descend into a protectionist abyss. They will have plenty of help from their domestic constituencies who rely on open trade in both directions. But some vigilance must be reserved for a media that, if left unchallenged, could provoke a trade war on its own. The more reporting there is about protectionist measures—even if it is just more reporting about the same protectionist measures (as today’s WP article is)—the more justified or compelled policymakers will eventually feel in turning to that poison. If a Congressman’s aide can point to articles that cite rising protectionism, even if the measures cited don’t justify the label of protectionism, it becomes less taboo to propose or support protectionist policies. That kind of fear mongering needs to be identified as such.

Yes, some countries are likely to dabble in some degree of protectionism—either with border measures or the more camouflaged regulatory variety. But the costs of that protectionism will quickly become apparent in a world where capital and talent flow to the jurisdictions with the fewest physical and administrative frictions.

Maybe that story will be written as the economy is on its way back up.

Are You Good for it, Ask the Chinese?

You might have trouble telling which country is the world’s superpower with the world’s largest economy, and which is the still relatively poor nation attempting to push its way onto the international stage.

Reports the New York Times:

The Chinese premier Wen Jiabao expressed concern on Friday about the safety of China’s $1 trillion investment in American government debt, the world’s largest such holding, and urged the Obama administration to provide assurances that its investment would keep its value in the face of a global financial crisis.

Speaking at a news conference at the end of the Chinese parliament’s annual session, Mr. Wen said he was “worried” about China’s holdings of Treasury bonds and other debt, and that China was watching United States economic developments closely.

President Obama and his new government have adopted a series of measures to deal with the financial crisis. We have expectations as to the effects of these measures,” Mr. Wen said. “We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.”

He called on the United States to “maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

Mr. Wen raised the concerns at a session in which he touted China’s comparatively healthy economy and said that his government would take whatever steps were needed to end the country’s economic slump. He also predicted that the world economy would improve in 2010.

The confident performance underscored the growing financial and geopolitical importance of China, one of the few countries to retain massive spending power despite slowing growth.

China has the world’s largest reserves of foreign exchange, estimated at $2 trillion, the product of years of double-digit growth.

Prime Minister Wen’s comments were conveniently timed, following a well-publicized naval game of chicken between a U.S. vessel and several Chinese boats in the South China Sea.  But the Chinese premier still has a point.  With the U.S. government stuck with unfunded liabilities in excess of $100 trillion even before it devoted trillions of dollars more to bail out just about anyone associated with the auto, housing, and financial industries, just how is Washington going to manage the new debt tsunami unleashed by the economic crunch?  Americans desperately want to know the answer to that question.

And, embarrassingly, so too do the Chinese.

Who’s Blogging about Cato

Here’s a few bloggers who are writing, citing and linking to Cato research and commentary:

  • David Kirkpatrick links to Richard W. Rahn’s op-ed in The Washington Times about the increasing loss of liberty in the United Kingdom.
  • Free-market energy blogger Robert Bradley, editor of Master Resource, cites Cato’s recognition of the women who launched the libertarian movement: Ayn Rand, Rose Wilder Lane and Isabel Paterson.
  • Scott Horton 0f Anti-War Radio interviews Doug Bandow about relations between the US and China.

Let us know if you’re blogging about Cato by emailing cmoody [at] cato [dot] org (subject: blogging%20about%20Cato) or drop us a line on Twitter @catoinstitute.