Obama's export goals: Will China trade be a sticking point?

Unless the US-China trade gap is seriously addressed, some economists say, Obama’s goal of 2 million new trade-related jobs will be unattainable.

By , Staff writer

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    A Chinese woman cleaner walks past a banner with the word 'Trade' on it in a central business district in Beijing, China, Tuesday.
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China 330, US 88.

Those numbers are not the score of some hotly contested international sporting event, but the value of the goods – in billions of dollars – that each country sells to the other.

That yawning gap between the two will loom large as President Obama pursues a goal he announced in his State of the Union address: doubling US exports and creating 2 million trade-related jobs in the next half decade.

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China may not be America’s largest trading partner, but its economy is the fastest-growing major economy in the world. Unless the US-China trade gap is seriously addressed, some economists say, the goal of 2 million new trade-related jobs will be unattainable.

“You can’t do it without cracking the Chinese market, and you can’t crack the Chinese market without doing something about China’s currency manipulation and trade barriers,” says Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business in College Park. “You can talk, but without some tough action, you’re not going to get much done.”

So far, however, the Obama administration is carefully skirting any direct confrontation with China.

On Thursday, Commerce Secretary Gary Locke unveiled a three-pillar plan for reaching the president’s goals. In a speech outlining Mr. Obama’s National Export Initiative, Secretary Locke said that the administration would increase export financing, beef up government assistance to US exporters, and bring tougher enforcement to trade pacts.

The program, Locke said, would address an “economic blind spot” that in recent years has allowed other countries to “chip away” at America’s international competitiveness. But he did not cite any particular countries as responsible for that chipping away.

That may change this weekend, when Treasury Secretary Timothy Geithner is to meet in Canada with other finance ministers for the wealthy countries in the Group of Seven. He’s expected to address the issue of China’s undervalued currency.

Obama made only a passing reference to China in discussing US trade challenges with Democratic senators Wednesday. He said the United States would be “putting constant pressure on China and other countries to open up their markets,” adding that “one of the challenges that we’ve got to address internationally is currency rates and how they match up.” Any artificially undervalued currency, he said, “puts us at a huge competitive disadvantage.”

But just Obama’s use of the word “pressure” drew a quick reaction from China. Chinese Foreign Ministry spokesman Ma Zhaoxu told reporters in Beijing that “criticism and pressing obviously is not helpful to solving problems,” according to the Associated Press. The Chinese currency’s exchange rate “is not the major reason for the Chinese-US trade deficit,” he said.

But according to Professor Morici, China’s undervalued currency is a major problem. In order to address an issue that China won’t, he says, the US should levy a tax on Chinese imports that would raise those imports’ price to where they would be under a fairly revalued Chinese currency. He acknowledges that is unlikely to happen, however, given the howls of protest that would come from major importers of Chinese goods.

Trade-promoting groups in the US are supportive of Obama’s export initiative but say that there are other trade issues that will require attention.

“China is critically important, but China is a political issue, and our trade relationship with China is likely to get worse before it gets better,” says Jake Colvin, vice president for global trade issues at the National Foreign Trade Council in Washington. “That shouldn’t stop us from moving forward on some of the things the president talked about in his [State of the Union] speech, like concluding the Doha Round [of global trade talks] and passing the [free-trade agreements] with South Korea, Colombia, and Panama.”

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