Tough calculus for Obama in Chinese leader's election-year visit

WASHINGTON Mon Feb 13, 2012 5:59pm IST

U.S. President Barack Obama talks about providing states flexibility under reauthorization of the No Child Left Behind Act in the East Room of the White House in Washington, February 9, 2012. REUTERS/Larry Downing

U.S. President Barack Obama talks about providing states flexibility under reauthorization of the No Child Left Behind Act in the East Room of the White House in Washington, February 9, 2012.

Credit: Reuters/Larry Downing

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WASHINGTON (Reuters) - Even as he greets China's vice president in the Oval Office on Tuesday, President Barack Obama is quietly overhauling U.S. economic policy toward Beijing, looking for new ways to extract results on issues such as market access and currency manipulation that have bedeviled him and his predecessors.

Obama's need to boost U.S. exports and show he can be firm with China, and his simultaneous hopes for a smooth start with Vice President Xi Jinping, who is due to become China's leader in 13 months, illustrate the conflicting tugs on Washington's China policy.

Making the calculus even more complicated, Xi arrives in the middle of a U.S. election year, in which Obama's dealings with Beijing are a popular punching bag for Republican presidential candidates aiming to challenge the Democratic incumbent.

Xi is getting the full Washington tour: visits to the State Department, Pentagon and Capitol Hill, as well as meetings with U.S. and Chinese business leaders.

But he won't be offered the complete red-carpet treatment. For all his power within the Chinese system, Xi is still for now No. 2, leader-in-waiting behind outgoing President Hu Jintao.

Obama's aides say the visit will produce few, if any, formal agreements. Rather they expect the president and Xi to size one another up. There will be firm talk from Obama on U.S. gripes, and perhaps from Xi as well.

While there has been progress in increasing U.S. exports to China, "we've also raised very directly instances where we believe that China is not living up to the rules of the road that all nations need to with regard to business practices," deputy national security adviser Ben Rhodes told reporters.

POLICY AND POLITICS

China is not beloved by the American electorate. Its trade and currency policies are blamed for job losses in the U.S. manufacturing sector that hit important election battleground states such as Ohio especially hard. Beating up on Beijing is an easy way for candidates from both parties to score political points.

Obama knows that, and he set the stage for tough talk at the Asia-Pacific summit in Hawaii in November, telling China to act like a "grown-up" by reforming trade and currency practices viewed as detrimental to the U.S. economy.

U.S. leverage over Beijing is limited, since China holds hundreds of billions of dollars of U.S. debt.

Still, the policy review, described by an official who recently left the Obama administration, is aimed at finding new ways of gettings results on limits to U.S. market access, China's use of state-owned corporations, the valuation of its yuan currency, which U.S. officials see as artificially low, and related issues.

In his State of the Union address last month, Obama announced a new enforcement unit that will investigate unfair trade practices. China will likely be a major target.

Republicans do not see a lot that is working. Mitt Romney, the apparent front-runner in the race for the Republican presidential nomination, has said Obama is not being tough enough. He promised to label China a currency manipulator - something the Obama administration has declined to do.

In a speech to technology executives on Friday, Romney slammed China's "autocratic model" of capitalism, and said that China's rise could ultimately threaten U.S. freedom.

Such criticism has gained traction on the campaign trail.

"China is just a drop in the bucket in terms of things the Obama administration is doing wrong," said Chrystalline Lauryl, 35, who was attending a conservative conference in Washington where the Republican candidates were speaking.

"There's friendly and there's buttering up," she said with regard to China policy. Obama, she said, was doing the latter.

The president's political advisers are aware that Xi's visit could trigger more attacks on the president's record, and they are ready with a string of comebacks about Romney's own record on the subject.

They point out, for example, that in his book "No Apology" Romney criticized Obama for being protectionist after putting tarriffs on Chinese tires, while as a presidential candidate Romney said he would apply tarriffs to goods after declaring the country a currency manipulator.

"That just gives us another opportunity to talk about a flip flop," a senior Obama campaign official said.

CALCULUS

Obama may not address Romney's critiques directly while Xi is in Washington, but the pressure of the election will influence his positioning.

"The way that China's been broached in the Republican primaries has been one of the things that has contributed to Obama having to take a tougher public stance on some of the China economic issues in particular," said Andrew Small, a China expert at the German Marshall Fund, who said U.S. officials would still be cognizant of China's sensitivity to protocol.

"For this trip itself, the calculus will probably net out in favor of laying on a good show for him," he said.

One senior administration official said the protocol would be appropriate to Xi's current position as vice president.

Making Xi's visit smooth is also important to Obama, who has an interest in establishing good relations with the man expected to lead the world's second-largest economy and most populous nation for the next 10 years.

"The hope of this administration is that (Obama is) going to be returned to power for another four years, and they want to establish a rapport between these two individuals," said Bonnie Glaser, a China expert at the Center for Strategic and International Studies.

Pomp and circumstance aside, the White House has signalled in advance it will not shy away from touchy subjects, many of which are important to U.S. voters.

Biden, who traveled to China to meet with Xi in August, called the country's one-child policy "God-awful" earlier this week and later met with a group of human rights advocates.

"We consider it an important visit - make no mistake -- because the relationship is important and his role as the future leader is important, so we're not going to in any way seek to diminish that importance because it's an election year," White House spokesman Jay Carney said.

"But we're also going to be pretty candid, as we have been in the past, about where we have differences."

(Additional reporting by Lily Kuo; Editing by Doina Chiacu)

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