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

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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