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Foreign Policy

Day One: Labeling China as a “Currency Manipulator”

Oct 27 , 2012

As the US presidential candidates crank up the heat on one another, China is increasingly caught in the middle.

Neither President Obama nor Mitt Romney want to be portrayed as lacking in conviction, which led to round after round of one-upmanship on who is more hawkish on China.

While President Obama asserts that interactions with China during his first term have been largely successful, Mr. Romney has fired back with accusations of appeasement and diplomatic weakness.

During Tuesday’s debate, he outlined his plans to check China’s rising star with scathing words and bold actions.

Presidential candidates bashing China is nothing new, and Chinese officials may have learned to take extreme campaign promises with a grain of salt. President Clinton had harsh words for Beijing, but ultimately signed a bill establishing regular trade relations between the two countries. President George W. Bush and President Obama both initially proposed labeling China a currency manipulator; but eventually backed off in favor of more diplomatic approaches.

Under the current circumstances, however, the candidates would do well to mind their words. This year's American presidential election coincides with the first Chinese political transition in a decade, and tensions are running high in Beijing. The lead up to succession has been marred by power struggles, a murder case resulting in the conviction of a top Party official’s wife, and growing malaise over the economy. While sitting Chinese politicians usually adhere to a Party-approved script on foreign policy, the Central Committee hopefuls jockeying for position are anything but predictable at the moment. Historically, the first months of a new Chinese administration have set the tone for the coming decade – any ill will between China and the United States over the next year will likely be amplified and echoed in Chinese policy stretching into the 2020s.

Mr. Romney's suggested several alterations for current China policy that elicited responses from Chinese news and social media. Perhaps his most unequivocal statement of the evening was his pledge to label China a currency manipulator on his first day in office — an act he claims is long overdue. The governor's foreign policy advisors do not seem concerned with the possibility that striking back at a Chinese economy already in slowdown could have severe ramifications for the United States, and Europe in particular.

But Governor Romney's escalations have the potential to start more than a mere trade war. He has stated repeatedly that he supports further sale of arms to Taiwan, a perennial sore subject for Beijing. In a declaration that was met with jubilation in Taipei, Mr. Romney pledged to sell Taiwan the latest F-16 fighter aircraft that President Obama has withheld out of deference to China. The Republican Party platform makes a point of asserting that the United States is willing to go to war to protect the Taiwanese status quo from Chinese unilateral action — Mr. Romney seems intent on provoking it.

This administration’s China policy has been criticized by the Romney camp for being overly timid, but an evaluation of President Obama’s decisions makes a case to the contrary. With help from Secretary of State Hillary Clinton, he has repeatedly ruffled Beijing’s feathers with strategic diplomatic protests and defiant gestures. The president met with the Dalai Lama in 2010 and again in 2011, prompting protests in China that the United States was interfering with Chinese domestic politics. But President Obama’s most prudent move may be maneuvering the United States toward full membership in the Trans-Pacific Partnership (TPP), a multi-lateral free trade agreement currently under negotiation. Though over a dozen countries have expressed interest in membership, there is little chance of Chinese participation, TPP could have the effect of diminishing China’s present dominance of regional trade without sparking a trade war.

Governor Romney has thrown caution to the wind by forsaking subtlety and pragmatism vis-à-vis China. The Chinese government has been receptive to American suggestions regarding human rights and economic issues when they are raised quietly, behind closed doors; the sort of public condemnation that the 2012 GOP platform advocates is typically less effective at bringing Beijing to the table. The Chinese have come to expect the level of diplomatic decorum commensurate with their stature as a global power, and they are already growing tired of this campaign trail braggadocio.

Mr. Romney has made it clear that his administration would be willing to engage Beijing in political brinkmanship, a tall order for the diplomatically ham-fisted governor. His proposed anti-China measures number among the few explicit campaign promises that the Republican candidate is willing to make, which makes them sound all the more sincere. Mr. Romney should be more judicious about statements made in the interest of domestic political expediency; there are Chinese policymakers following his progress every bit as eagerly as the American public. They might not interpret his belligerent poses as the empty threats of a paper tiger.

 

Colin Moreshead is a freelance writer living and working in Tokyo. He studied at Wesleyan and Waseda Universities, where his research focused primarily on Japanese economic institutions and exchange rate policy.

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