Obama Begins Jawboning Campaign with Chinese President Hu

The Obama administration's strategy for dealing with Chinese mercantilism is known in economic circles as "jawboning." On Friday, President Obama himself kicked off the campaign during a phone call with Chinese President Hu Jintao. Here's a selection from the Associated Press story by Ben Feller:

President Barack Obama on Friday opened his relationship with Chinese President Hu Jintao, promising cooperation in a phone call that broadly covered sensitive trade issues, the global financial crisis and the North Korean nuclear threat....

In the phone call, Obama stressed the need to "correct global trade imbalances," said White House press secretary Robert Gibbs. The U.S. president and Hu agreed that close cooperation is vital to stimulate worldwide economic growth and to get credit flowing more freely, Gibbs said....

Hu told Obama that China is ready to strengthen dialogue and expand cooperation in facing challenges such as the global financial crisis, the official Xinhua News Agency reported Saturday. Hu added that he remains firmly opposed to trade protectionism....

Although jawboning is a continuation of President Bush's strategy for dealing with China, there is a difference. President Obama plans to do some of the jawboning himself while President Bush left it to his top advisers. Unfortunately, jawboning hasn't worked, doesn't work, and never will work. I wonder how long it will take the Obama administration to figure that out. The Bush administration never did.

The most interesting part of the conversation was President Hu's statement "that he remains firmly opposed to trade protectionism." This means that he doesn't consider the Chinese tariffs on American vehicles, mining machinery, and auto parts to be protectionism. Nor does he consider the Chinese currency manipulations that keep American products expensive and Chinese products inexpensive to be protectionism. Nor does he consider China's expanding export subsidies in order to out-compete foreign products in world markets to be protectionism. What he means is that he remains opposed to any attempts by the American government to protect American industries from Chinese attempts to steal them.

Meanwhile, the Chinese government is offering to balance trade with Spain. The following is a selection from a Chinese report on Saturday about the trip of their Premier Wen Jiabao to Spain:

MADRID, Jan. 30 (Xinhua) -- China will take active steps to seek a balanced growth in bilateral trade with Spain as part of its efforts in promoting all-around China-Spain cooperation, visiting Chinese Premier Wen Jiabao said Friday.

China and Spain have planned to increase bilateral trade volume to 40 billion U.S. dollars by 2011, Wen said at a meeting with his Spanish counterpart Jose Luis Rodriguez Zapatero.

To reach this objective, China will send a purchasing group to Spain so as to expand its product and equipment imports from the country, said Wen, who is on an official visit to Spain.

So why is China willing to balance trade with Spain, but not with the United States? I can think of three possibilities:

1. Spain does not have any industry left that China wants to steal. America does. China has plans to steal market share from our remaining aircraft production, auto parts, vehicle production, appliance production, mining equipment, and hi-tech industries. If they started buying as much from the United States as we bought from them, all of those American industries would thrive.

2. China's Communist government does not feel threatened by Spain, but they do feel threatened by the United States, which advocates democracy and freedom. At the end of his Associated Press story, Bob Feller alludes to this motive. He wrote: "Chinese censors silenced part of a live broadcast of Obama's inaugural address, removing references to communism and dissent."

3. China hasn't figured out how serious the Obama administration is about balancing trade. There were many issues discussed by Hu Jinbiao and President Obama, not just trade.

The good news is that President Obama's administration realizes that balanced trade is a worthy goal. The bad news is that they appear to think that all they need to do is talk in order to get there.

Comments

[HaavBline:]

This so called economist arguments are not even academic. It is bare knuckled China bashing that really is not worth wasting time on.

Feb 02 11:23 AM

[Feng:]

Agree, change the title to "China is stealing from America" would be appropriate.

Feb 02 11:44 AM

[xcer:]

So I guess it is alright for US protectionism for the Automobile industry by only bailing out the big three when other brand such as Toyota, Honda, Nissan, Benz, BMW and other which are also incorporated in the US and hires hundred of thousands of American Auto workers and gives business to hundreds of American Auto parts workers; for the Agricultural industry by subsidizing so much to a point that no other country can export to the US; for the Pharmaceutical industry by using the FAA to make it impossible for other country to penetrate the US market and yet sell their product at such a huge mark up that millions in the 3rd world countries are dying.

When will American auto industry will admit that no one in the world are interested in buying American cars that are design for the American market. When Japan finally lower tariffs for auto import to a point that foreign imports are cheaper than Japanese cars, the Japanese only import European cars. In UK Lamborghini out sells Cadillacs. Yet when the US car company design and manufacture for the local market they are successful, Ford in Europe, Buick in China, Ford in Australia, etc. The point is that if they are not design for the local market, most likely the car will not succeed. What is consider good in the US does not mean it is consider good in other countries. The foreign brands develop cars specifically for the US market.

When China is not importing items like aircraft from Boeing they are buying from Airbus, China only just test flighted their own first passenger plane which is still years from actual productions. All those mining equipments, high tech equipments and manufacturing tools are brought from Germany because they are consider better engineered. But they do buy a lot from Caterpillar. Another big problem is that US is not willing to sell a lot of things to China, yet these products seems to be sold to terrorist sponsoring countries and to dictators.

"United States, which advocates democracy and freedom", haha, our country talks about it but at the same time support all these dictators that steal from their own countries.

"Chinese currency manipulations that keep American products expensive and Chinese products inexpensive" The RMB will have to probably be traded more than USD1 to RMB1 to true, beside most of what China export did not cause US manufacturing jobs, most was lost to Japan, Korea, Hong Kong, Taiwan and the Philippines decades ago. China is really taking the manufacturing jobs from these countries. Also people must realize that while China has a huge surplus against the US, China runs a deficit with almost all its trading partners except for Western Europe and US and the actual total trade surplus globally in total is much lower. It is just that the finish goods are manufacture in China because of its vast infrastructure and assembly capability. China does not even come close to India in causing American job loss in the area of high-tech and call center business. Beside most of the imports to China are made by Taiwanese, Japanese, Korean and (yes) American factories in China. Chinese own companies is only just getting started.

Us companies also has to realize that they can not be selling products in China at the same retail prices in China because majority of its people can not afford it. Only less than one percent of Chinese people can really afford foreign goods.

China has its problems but so does the United States. US has to realize that the two economy are very much tied together and are inter-dependent on each other. Each has their own strengths and weaknesses. They have to work together to maintain a stable world economy. US can not just keep blaming their problems on other countries and not recognize their own problems. Starting a trade war would be the worst thing for both countries but probably will affect US more as the rest of the world will take the opportunity to take US market shares away. US has to treat China as an equal partner because both economic and military threats against China is useless. US also has to forget about the "Communist government" label, communism is dead. While China is getting more and more capitalistic, US is becoming more and more socialist.

Feb 02 11:54 AM

[Firat Ünlü:]

Include geopolitics in your analysis and you will understand why it's Spain and not the US.

Feb 02 02:50 PM

[MikeT:]

You are absolutely right about the US issues and subsidies. Politicians are so linked to the lobbyists for auto companies, farm issues, roads and highways, teacher's unions. etc. that they can't begin to see the protectionist policies they have created.The US "stole" the world's industries in the 1920s and now someone else has the ball. Amazingly, England and France haven't folded their tents and we won't either.
If anyone really wants to protest China importations, stop going to Wal mart. I have read that they alone represent 15% of our China imports.
No countries protectionist policies are going to be changed voluntarily. It takes direct negotiations and tit-for-tat trades to get it done.

On Feb 02 11:54 AM jyung wrote:

> So I guess it is alright for US protectionism for the Automobile
> industry by only bailing out the big three when other brand such
> as Toyota, Honda, Nissan, Benz, BMW and other which are also incorporated
> in the US and hires hundred of thousands of American Auto workers
> and gives business to hundreds of American Auto parts workers; for
> the Agricultural industry by subsidizing so much to a point that
> no other country can export to the US; for the Pharmaceutical industry
> by using the FAA to make it impossible for other country to penetrate
> the US market and yet sell their product at such a huge mark up that
> millions in the 3rd world countries are dying.
>
> When will American auto industry will admit that no one in the world
> are interested in buying American cars that are design for the American
> market. When Japan finally lower tariffs for auto import to a point
> that foreign imports are cheaper than Japanese cars, the Japanese
> only import European cars. In UK Lamborghini out sells Cadillacs.
> Yet when the US car company design and manufacture for the local
> market they are successful, Ford in Europe, Buick in China, Ford
> in Australia, etc. The point is that if they are not design for the
> local market, most likely the car will not succeed. What is consider
> good in the US does not mean it is consider good in other countries.
> The foreign brands develop cars specifically for the US market.<br/>
>
> When China is not importing items like aircraft from Boeing they
> are buying from Airbus, China only just test flighted their own first
> passenger plane which is still years from actual productions. All
> those mining equipments, high tech equipments and manufacturing tools
> are brought from Germany because they are consider better engineered.
> But they do buy a lot from Caterpillar. Another big problem is that
> US is not willing to sell a lot of things to China, yet these products
> seems to be sold to terrorist sponsoring countries and to dictators.
>
>
> "United States, which advocates democracy and freedom", haha, our
> country talks about it but at the same time support all these dictators
> that steal from their own countries.
>
> "Chinese currency manipulations that keep American products expensive
> and Chinese products inexpensive" The RMB will have to probably be
> traded more than USD1 to RMB1 to true, beside most of what China
> export did not cause US manufacturing jobs, most was lost to Japan,
> Korea, Hong Kong, Taiwan and the Philippines decades ago. China is
> really taking the manufacturing jobs from these countries. Also people
> must realize that while China has a huge surplus against the US,
> China runs a deficit with almost all its trading partners except
> for Western Europe and US and the actual total trade surplus globally
> in total is much lower. It is just that the finish goods are manufacture
> in China because of its vast infrastructure and assembly capability.
> China does not even come close to India in causing American job loss
> in the area of high-tech and call center business. Beside most of
> the imports to China are made by Taiwanese, Japanese, Korean and
> (yes) American factories in China. Chinese own companies is only
> just getting started.
>
> Us companies also has to realize that they can not be selling products
> in China at the same retail prices in China because majority of its
> people can not afford it. Only less than one percent of Chinese people
> can really afford foreign goods.
>
> China has its problems but so does the United States. US has to realize
> that the two economy are very much tied together and are inter-dependent
> on each other. Each has their own strengths and weaknesses. They
> have to work together to maintain a stable world economy. US can
> not just keep blaming their problems on other countries and not recognize
> their own problems. Starting a trade war would be the worst thing
> for both countries but probably will affect US more as the rest of
> the world will take the opportunity to take US market shares away.
> US has to treat China as an equal partner because both economic and
> military threats against China is useless. US also has to forget
> about the "Communist government" label, communism is dead. While
> China is getting more and more capitalistic, US is becoming more
> and more socialist.

Feb 02 03:03 PM

[DHH:]

hahaha... China wants to steal America's auto industry? Riiight. There is no a single soul in the world that wants those piece of crap American auto companies.

Feb 03 12:28 AM

[LostJedi:]

This article left a bad after-taste. Find out how much of that trade is done by American companies that decided to outsource to dirt-cheap Chinese labor. Find out how much of that trade is contributed by the American enterprise. This 'monster' was created by us, not by the Chinese.

Feb 03 02:26 AM

[huangthomas:]

I have noted that much of Obama speech is campaign rhetoric, such as buy American, modify free trade, someone is stealing industries from us......... I thought that he should stop doing it now that he has been elected and the election is over. I was dead wrong, he is still running, running for re-election. We are going to hear 4 more years of the rhetoric to please American electorate and accomplish nothing.

Feb 03 11:30 AM

[seneca:]

Read no further than this guy's statement that 'Unfortunately, jawboning hasn't worked, doesn't work, and never will work' and you can see this post article is quite without value. The RMB has increased some 20% against the USD since 2006.

Feb 03 01:07 PM

[seneca:]

While China is certainly becoming more capitalist, the US is hardly getting more socialist. It's getting stupider -- not the same thing.


On Feb 02 11:54 AM jyung wrote:

> So I guess it is alright for US protectionism for the Automobile
> industry by only bailing out the big three when other brand such
> as Toyota, Honda, Nissan, Benz, BMW and other which are also incorporated
> in the US and hires hundred of thousands of American Auto workers
> and gives business to hundreds of American Auto parts workers; for
> the Agricultural industry by subsidizing so much to a point that
> no other country can export to the US; for the Pharmaceutical industry
> by using the FAA to make it impossible for other country to penetrate
> the US market and yet sell their product at such a huge mark up that
> millions in the 3rd world countries are dying.
>
> When will American auto industry will admit that no one in the world
> are interested in buying American cars that are design for the American
> market. When Japan finally lower tariffs for auto import to a point
> that foreign imports are cheaper than Japanese cars, the Japanese
> only import European cars. In UK Lamborghini out sells Cadillacs.
> Yet when the US car company design and manufacture for the local
> market they are successful, Ford in Europe, Buick in China, Ford
> in Australia, etc. The point is that if they are not design for the
> local market, most likely the car will not succeed. What is consider
> good in the US does not mean it is consider good in other countries.
> The foreign brands develop cars specifically for the US market.<br/>
>
> When China is not importing items like aircraft from Boeing they
> are buying from Airbus, China only just test flighted their own first
> passenger plane which is still years from actual productions. All
> those mining equipments, high tech equipments and manufacturing tools
> are brought from Germany because they are consider better engineered.
> But they do buy a lot from Caterpillar. Another big problem is that
> US is not willing to sell a lot of things to China, yet these products
> seems to be sold to terrorist sponsoring countries and to dictators.
>
>
> "United States, which advocates democracy and freedom", haha, our
> country talks about it but at the same time support all these dictators
> that steal from their own countries.
>
> "Chinese currency manipulations that keep American products expensive
> and Chinese products inexpensive" The RMB will have to probably be
> traded more than USD1 to RMB1 to true, beside most of what China
> export did not cause US manufacturing jobs, most was lost to Japan,
> Korea, Hong Kong, Taiwan and the Philippines decades ago. China is
> really taking the manufacturing jobs from these countries. Also people
> must realize that while China has a huge surplus against the US,
> China runs a deficit with almost all its trading partners except
> for Western Europe and US and the actual total trade surplus globally
> in total is much lower. It is just that the finish goods are manufacture
> in China because of its vast infrastructure and assembly capability.
> China does not even come close to India in causing American job loss
> in the area of high-tech and call center business. Beside most of
> the imports to China are made by Taiwanese, Japanese, Korean and
> (yes) American factories in China. Chinese own companies is only
> just getting started.
>
> Us companies also has to realize that they can not be selling products
> in China at the same retail prices in China because majority of its
> people can not afford it. Only less than one percent of Chinese people
> can really afford foreign goods.
>
> China has its problems but so does the United States. US has to realize
> that the two economy are very much tied together and are inter-dependent
> on each other. Each has their own strengths and weaknesses. They
> have to work together to maintain a stable world economy. US can
> not just keep blaming their problems on other countries and not recognize
> their own problems. Starting a trade war would be the worst thing
> for both countries but probably will affect US more as the rest of
> the world will take the opportunity to take US market shares away.
> US has to treat China as an equal partner because both economic and
> military threats against China is useless. US also has to forget
> about the "Communist government" label, communism is dead. While
> China is getting more and more capitalistic, US is becoming more
> and more socialist.

Feb 04 06:47 PM