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.
