By Doug PalmerWASHINGTON (Reuters) – In this year’s race for the US presidency, Republican challenger Mitt Romney’s brash confidence in free markets contrasts with President Barack Obama’s more cautious approach.
Republican US presidential candidate Mitt Romney (R) and vice president select US Congressman Paul Ryan (R WI) wave to supporters during a campaign event in Waukesha, Wisconsin August 12, 2012.
With the US unemployment rate still stubbornly above 8 percent, Romney is courting blue collar votes in swing states like Ohio by promising to get tough with China over its currency practices and by highlighting Obama’s refusal to formally label Beijing a currency manipulator.
His tough talk, however, is mixed with a plan more appealing to US business groups, who worry a showdown over the value of China’s currency could start a trade war with Beijing.
Romney has proposed a “Reagan Economic Zone,” a new super sized free trade agreement without precise geographic boundaries to act as a counterweight to the Asian powerhouse.
The first, with Israel, was crafted when Ronald Reagan was president in the 1980s; the latest – with South Korea and Colombia – were approved by Congress on Obama’s watch.
To the extent that parts are made in South Korea and shipped to the United States for assembly, the added economic value tends to remain overseas.
With China an increasing economic challenge, Romney says the United States should now consider forging those pacts together and linking them to possible new deals with the European Union and other trading partners in the Asia Pacific region.
Pursuing deeper trade ties with the US, Japan and other countries could add as much as 2% to European Union gross domestic product in the long term, the European Commission said in a new report published Friday, but for this to be achieved negotiations with several of the potential partners will need to speed up significantly.
“The idea of the Reagan Economic Zone, at the conceptual level, bridges the ideas of opening markets and confronting those that don’t play by the rules,” Oren Cass, domestic policy director for the Romney campaign, said in an interview.
Despite the Republican branding bid, analysts say Obama is already moving toward a similar goal in trade talks in the Asia Pacific region.
His administration is also exploring trade talks with the 27 nation European Union and could make a decision to launch negotiations with Brussels by the end of the year.
“The campaigns will try to paint very, very stark differences in policy and in most areas the policies will be very similar,” said Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics.
‘BLOW THE WHISTLE’Romney, a former Massachusetts governor and successful businessman, accuses his Democratic opponent of damaging US trade leadership and wasting valuable time by taking three years to win congressional approval for pacts with South Korea, Colombia and Panama concluded by Republican President George W.
Obama’s decision not to ask Congress for “trade promotion authority,” legislation long considered essential for negotiation of trade agreements, is another sign of neglect on the trade front to appease union groups, Romney says.
” “He has offered no forward looking agenda or given any reason to believe things would be different in a second term,” he said.The White House rejects such charges, saying it inherited three agreements that could not be approved without changes and extensive consultations with Congress to build support.It disputes the notion that US trade negotiators have been hampered by a lack of trade promotion authority, and says it will seek the legislation at the “appropriate time.
“The administration also touts its record on enforcement of trade agreements, but Romney argues that the White House has not done enough to make China play by global trade rules, especially on currency.US manufacturers complain that China deliberately undervalues its currency to give its exporters an unfair price advantage.Four years ago, the Peterson Institute for International Economics, a Washington think tank, estimated the yuan was undervalued by 31.5 percent against the dollar. Its latest estimate in May was only 7.7 percent, although the yuan has dropped in value since then.Romney has promised to move both unilaterally and in cooperation with other countries to rein China in, starting with a high profile pledge to formally label Beijing as a currency manipulator on his first day in office.”.
That’s not to say on day one, we’re going to impose massive tariffs,” Cass said. “But let’s at least be willing to acknowledge that you do manipulate your currency and let’s start a discussion about that.
“Obama promised during the 2008 presidential campaign to take China “to the mat” for undervaluing the yuan. But in seven semi annual Treasury Department reports, he has declined to label China a manipulator, Cass noted.”.
It certainly makes it hard to demand that everybody play by the rules when you’re not willing to stand up and blow the whistle when they don’t,” Cass said.White House officials say Obama has been able to achieve success on the currency front through diplomacy without formally declaring China a manipulator. After holding the yuan steady against the dollar for three years, China resumed a gradual appreciation in June 2010.”.
This has been front and center in our conversations with them and we think it produced substantial results,” White House international economic affairs adviser Mike Froman said.”.
But we think we’ve had quite an effective strategy,” Froman said.’OUR RECORD STANDS UP’Cass said Romney has no intention of starting a trade war, but believes the United States should be prepared to use whatever leverage it has, or what Romney’s website describes as a “fresh and fearless approach” to China trade.One way to pressure China to do more to stop piracy and counterfeiting of foreign goods would be for “the US, the EU and Japan to all hold hands together and say to China, ‘We’re going to block the following technology transfers into your country until you prove a willingness to actually enforce our intellectual property rights’,” Cass said.Since Obama took office, the US trade deficit with China has continued to rise, a trend blamed by union groups for millions of lost jobs. It hit a record 295 billion last year.Romney has also promised to allow the Commerce Department to slap countervailing duties on Chinese goods if Beijing continues to undervalue its yuan, a move the Obama administration considered and rejected.But Obama has won World Trade Organization victories against Beijing in areas ranging from intellectual property rights to financial services to raw materials trade, and has launched several other challenges, such as a case against Chinese export restrictions on rare earth materials.He has also created a new interagency trade enforcement unit to devote more resources to ensuring China and other countries abide by global trade rules.”.
Stefanie O'Neill is a business journalist based in Hong Kong, China. Stefanie has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Stefanie spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.