Obama vs. Romney on China

September 25th, 2012 10:12 AM ET
By Adam Hersh, Special to CNN

Editor’s note: Adam Hersh is an economist at the Center for American Progress Action Fund. The views expressed are the author’s own.

A formal White House challenge last week against Chinese subsidies that threaten U.S. auto industry jobs is being interpreted as the latest salvo in a contest about whether the president or challenger Mitt Romney is tougher on China. Heightened political focus on trade policy is welcome, but the choice for voters comes at a critical moment in U.S.-Sino trade relations. After decades of robust growth, China’s economy is slowing just as a scandal-laden Communist Party is facing its biggest threat to legitimacy since Tiananmen Square. China’s leaders will probably double-down on anti-competitive trade practices to shore up growth and their hold on power, undercutting industries and communities across the United States just as U.S. exports and manufacturing jobs are gaining ground.

That means U.S. voters should carefully consider the presidential candidates’ position on China, because those policies could very well have a bottom-line effect on our economy. Most voters probably haven’t heard too much about China so far this campaign, save maybe Republican Party candidate Mitt Romney’s accusation that President Barack Obama is being treated like “China’s doormat.”

In truth, the candidates’ policy positions are more similar than Romney would care to admit. And, unlike Romney, Obama has a substantial record of action and results on China trade, not just tough talk.

What we know of Romney’s track record is less than encouraging. He has profited from shuttering American factories and reopening them in China and other low-wage countries. According to our analysis, his tax proposals would further widen the loopholes that incentivize corporate offshoring. And his gaffe-laden trip this summer to London, Poland, and Israel drew rebukes even from Republican political operative Karl Rove.

Meanwhile, Obama has already accomplished most of what Romney pledges to do on trade, and more. Romney’s 59 point economic plan calls for implementing trade agreements with Colombia, Panama, and South Korea, and negotiating the Trans-Pacific Partnership, a multilateral agreement between partners on both sides of the Pacific. The president has already checked these off his to-do list.

Romney pledges to increase funding for the Office of the U.S. Trade Representative to enforce the rules of fair trade. So does President Obama, who allocated the office an additional $80 million in his proposed budget, which was ultimately obstructed by conservatives in Congress. Going beyond just proposing more money for trade enforcement, Obama created an Interagency Trade Enforcement Center to make our government smarter and more effective at ensuring a level playing field for U.S. workers and businesses competing in the global economy.

Indeed, Obama has been tougher on enforcing trade rules than anyone who came before. The Obama administration is pressing World Trade Organization complaints against China at nearly double the pace of President George W. Bush and is prosecuting China dumping and countervailing duty violations of U.S. law at a pace 25 percent faster than under Bush. As a result, U.S. exports are now growing faster than under either Presidents Bush or Bill Clinton, and U.S. manufacturing added new jobs for the first time in a longtime: more than half a million since the beginning of 2010.

There are differences in style and substance between the candidates on the critical issue of China’s artificially undervalued exchange rate, which gives Chinese exporters an unfair competitive advantage over American producers. Romney says he will label China a “currency manipulator” on Day 1 of his presidency, a declaration that under U.S. law would trigger diplomatic action. Obama has preferred to apply pressure behind the scenes, dispatching hundreds of officials from across the government to a new and annual U.S.-China Strategic and Economic Dialogue. The president’s approach – more substantive and nuanced than name-calling threats – has worked; China raised its exchange rate nearly 8 percent from 2010 to April 2012.

Since April, however, China’s currency again depreciated by 1 percent as its economic growth faltered. Clearly, more than just bilateral pressure is needed to keep China’s exchange rate honest. So the president has pressed the Group of 20 industrialized and emerging economy nations to join forces on this problem. And as a consequence, China has agreed to a “mutual assessment process” under the G-20 to evaluate the damage its policies are doing to worldwide economic growth and stability.

Continued progress on Sino-American economic relations requires a steady and experienced hand at the controls in the next four years, as China’s weakening economy increases the likelihood it will resort to anticompetitive practices. Romney’s background as an outsourcing pioneer with limited diplomatic experience and a penchant for inflammatory rhetoric should give U.S. voters pause in November.

Hanna Zhu, economics student at Massachusetts Institute of Technology and CAPAF intern, provided research assistance on this article.