US Grapples With China Policy

An aggressive Republican White House hopeful Mitt Romney tried twice to draw President Barack Obama into discussing U.S. policy toward China during the first televised presidential debate on Wednesday, but the incumbent did not rise to the bait.

The objective of the debate was to focus on U.S. domestic policy, but Romney seized the opportunity to blame China for America's high unemployment and twin budget and trade deficit problems.

Both the contenders have been sparring repeatedly on China and running television commercials to underline their toughness on the Asian giant in the run-up to the debate ahead of the Nov. 6 polls amid voters' concerns over the loss of manufacturing jobs at home to outsourcing and foreign competition.

But Obama, who has attacked Romney's former companies for shipping jobs to the world's most populous nation, kept China off the table on Wednesday as his rival pounded the president's policies in the debate.

When the question of creating new jobs to contain unemployment was posed by the debate moderator, Romney bluntly said he will "crack down on China, if and when they cheat," in an apparent reference to accusations that Beijing is manipulating its currency to make its exports more competitive—which could worsen the U.S. trade deficit and hinder American job growth.

To another question on how he would cut spending to check the massive U.S. deficit problem, Romney highlighted China's role in bankrolling the U.S. economy—as the largest foreign holder of U.S. debt—and vowed to cut dependence on borrowing from the Chinese.

"Well, first of all, I will eliminate all programs by this test—if they don't pass it: Is the program so critical it's worth borrowing money from China to pay for it? And if not, I'll get rid of it," Romney said.

"I'm not going to keep on spending money on things to borrow money from China to pay for it. That's number one," he said.

'Currency manipulator'

Romney has not minced his words on how he would deal with China if he occupies the White House.

He has said that if he is elected, on his first day in office, he'll label China a currency manipulator—which could lead to trade sanctions against the country.

He said he would also balance the budget by scrutinizing whether each federal program is so important that it's worth borrowing money from China to finance it.

The former Massachusetts governor has accused China of "cheating" by keeping its yuan currency lower against the U.S. dollar in a bid to make Chinese goods more competitive and has charged that China is "stealing" American ideas for "everything from computers to fighter jets."

The Obama administration had seven opportunities to label China a currency manipulator through the U.S. Treasury Department's semiannual reports on exchange-rate policies, but it didn't, he said.

But Obama has emphasized that the United States has to tread carefully in taking action against China for any illegal trade practices, warning it could trigger an all-out trade war that would damage both economies.

“What we have found is that when we push them very hard but we don’t go out of our way to embarrass them, we get results,” Obama told a local Cleveland newspaper last week

“There’s a strong nationalist sentiment inside of China, and they’ve got their own economic pressures. So we’re not interested in triggering an all-out trade war that would damage both economies.”

WTO

While not taking any action against China on the currency front, the Obama administration has launched other trade-related assaults against Beijing.

They include seven World Trade Organization (WTO) complaints over "illegal" subsidies and other Chinese practices linked to automobiles, rare-earth minerals, solar panels, wind turbines, poultry, tires, and music.

"We've brought more trade cases against China in one term than the previous [George W. Bush] administration did in two," Obama told a crowd in the top battleground state of Ohio. "And every case we've brought that's been decided we won," Obama said.

Last Friday, citing national security risks, Obama blocked a Chinese company from owning four wind farm projects in northern Oregon near a Navy base where the U.S. military flies unmanned drones and electronic-warfare planes on training missions.

It is the first time in more than two decades that a U.S. president has blocked such a foreign business deal.

And just before the debate on Wednesday, the Obama campaign released a new TV ad accusing Romney of profiting from and indirectly supporting “sweatshop conditions” at a Chinese appliance company in which his Bain Capital previously invested.

“A company called Global Tech maximized profits by paying its workers next to nothing under sweatshop conditions in China,” the commercial says, over photo images of distressed-looking Chinese factory workers.

Backfire

As the presidential rivals step up China bashing, experts caution it could backfire on the U.S. economy, which is growing at an anemic rate, and dampen ties between the world's two largest economies.

Former Secretary of State Henry Kissinger sharply criticized Obama and Romney for appealing to what he called American suspicions of China in their campaigns, saying they had used "extremely deplorable" language.

"I have seen these advertisements with the two candidates competing with each other on how to deal with a cheating China. And both used the word cheat as applied to China," Kissinger said Wednesday at the Washington-based Woodrow Wilson Center.

Aggressive campaign rhetoric against China will set the United States back no matter who the next American president is, according to former U.S. Ambassador to China Jon Huntsman.

“It doesn't help the relationship,” Huntsman told NBC News.

“Let’s just say it sets us back by putting us behind in terms of the makeup work that must be done once you’re in office. So instead of being able to start a dialogue on Day One that really begins to address problem-solving and relationship-building, you’re, in a sense, in a penalty box.”

Huntsman added that such a delay “wastes valuable time” that should be spent building what is “probably the most complicated relationship in the world.”

Still, the China issue is unlikely to die down, with nearly a month away from the polls.

More questions on China are expected to be raised when Obama and Romney participate in the other debates on Oct. 16 and Oct. 22, when foreign policy will be a key theme.