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Obama Waves, If Not Shakes, Economic Stick at China

By Frank Ahrens, Washington Post
July 27, 2009

This morning kicked off two days of intense economic discussions between the U.S. and China here in Washington, and President Obama opened the session with a speech, mentioning the unmentionable issue with China: human rights.

Obama said that the U.S. respects China's "ancient culture" but added: "We also strongly believe that the religion and culture of all peoples must be respected and protected, and that all people should be free to speak their minds."

"That includes ethnic and religious minorities in China, as surely as it includes minorities within the United States," Obama said.

This was an important statement from the young president and marked a significant break from his Democratic predecessor in the White House, Bill Clinton, who famously -- or infamously, depending on where you stand on China -- "de-linked" the human rights issue from trade between the two nations.

China may look like a market-based economy (it's really a poorly regulated Wild West bazaar) but make no mistake: Its central government remains totalitarian and does not tolerate dissent, especially from minority groups or organizations. Evidence is plentiful, from the crackdowns on the Falun Gong, the Tibetans, the Uighurs and even Christian Chinese.

Clinton made the calculation that China's might and value to the U.S. as a rising trading and global economic power was worth looking the other way at China's human rights crackdowns. In 1994, he granted China most-favored nation trading status, de-linking economics from the human cost in China.

Today, Obama did not shake a big stick at China, but perhaps he waved it a little bit.

It is a delicate dance with the Chinese, and it has been going on in this administration almost from Day One. Even before he was confirmed as Treasury secretary, Tim Geithner essentially accused China of manipulating its currency. He later backed off the statement a bit, but his point was made. Many U.S. businesses believe China does in fact manipulate its currency, raising the price of U.S goods sold there.

China escalated the Cool War between the two nations by continuing to suggest that the dollar has outlived its usefulness as a global reserve currency and a new one is needed.

This is particularly troubling for the U.S., as China is now the largest U.S. creditor, holding about 24 percent of all U.S. debt.

The Ticker asked our favorite highly decorated economist, Columbia University's Jagdish Bhagwati, what he thinks about the ongoing relationship between the U.S. and China and whether this president -- or any president -- has enough economic muscle to make China more tolerant of all of its citizens.

"President Clinton expected that engagement in trade would lead the Chinese into better behavior," Bhagwait wrote via e-mail. "I would argue that things in China would have been much worse if they were not open to the world as they are now, through trade, World Trade Organization membership etc.etc."

Bhagwati continued: "President Obama doubtless believes that too; he is not asking for ostracism, simply for the Chinese knowing that entry into the world polity requires that flagrant violations of human rights will cost them credibility and respect: even the Chinese communists understand that."

The Ticker hopes Prof. Bhagwati is right, and hopes that he's right soon.

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