Obama Will Become “Cripple” President If He Does Not Change Course
Obama can become a “cripple” president if he returns to Washington and does not communicate with the opposing party in an open and honest manner, thus enhancing cooperation. But he also has the chance to win back if the economy regains prosperity during his term as president of the United States.
Before his trip to Asia, American president Barack Obama vowed to criticize China’s RMB exchange rate during each stop, including Mumbai, New Delhi, Jakarta, Seoul and Yokohama. However, in two consecutive summits, the G-20 and APEC, he didn’t expect the cold shoulder he received when he criticized China for manipulating the RMB exchange rate, in both Seoul and Yokohama. Many worried that if Obama does not change course, he will soon become a “cripple” president who does not have the capacity to get things done.
“Like the boy who cried 'wolf,' he died alone and haggard,” is a good metaphor to describe the fact that Obama was disfavored in Seoul and Yokohama, to say the least. The reasons were the following.
Asian countries disagreed with Obama’s criticism towards China
First, the main issue in the G-20 Summit was to prevent the so-called “currency war” from happening around the world. The main topic for the APEC Summit was “regional integration,” how to make the idea of “Asian Pacific Free Trade Circles” (FTAAP) more specific and concrete. Obama did not give any detailed proposals on how to avoid a currency war or how to accelerate regional integration; instead, he kept on beating the Chinese RMB exchange rate. It was not surprising that he was ignored by the Asian countries.
Secondly, the reason why leaders were indifferent to Obama’s criticism toward China for manipulating the RMB exchange rate was that, even though many countries agreed that the RMB exchange rate might be the reason for the U.S. trade deficit, it absolutely did not cause the global economy to get flushed down the toilet. What really caused the global economy to go downhill were the Americans’ subprime mortgages, chaotic banking system, inverted pyramid salary structure and off-tone capitalism. Instead of examining his own country’s faults, the President of the United States chose to blame China, whose economy was in better shape than the rest of the world after the global economic crisis. No wonder the other summit leaders thought little of Obama in this particular event.
Thirdly, in Nov. 11, 2010, during the meeting between Chinese president Hu Jintao and American president Barack Obama where they discussed the RMB exchange rate, President Hu pointed out that instead of the RMB exchange rate, it was America’s secondary quantitative easing that affected the interests of the developing countries. On the second day, Obama directly blamed China, stating that China’s “unfair trade” and its “currency exchange rate manipulation” would damage the recovering global economy. He also pointed out that as a country that “has large trade surpluses,” China should not become “overly dependent on exportation.” Each country’s exchange rate should “reflect its own economy truthfully.” He also attacked Beijing for spending billions to interfere with the market, thereby keeping the RMB in an undervalued status. He insisted that the Chinese government should ease its control over the currency and let the market decide the true value of the RMB.
On the 13th, Obama again pressured China in Yokohama and raised the issue of China using cheap RMB to boost its own exportation. He said, “A country that has a huge surplus must change its unhealthy dependence upon export, and it must take action to increase its domestic demand.” In the APEC Summit, he also stated that “no country should think that they can access the road to prosperity by exporting goods to the United States.” Apparently, if necessary, the United States may use its trade measures to limit some countries’ export to the U.S., countries who gain unfair trade advantages by interfering and manipulating their own currencies.
However, the leaders disagreed with Obama in the meetings. They thought that even if the RMB increased in value drastically, not only would it be unable to help save the U.S. economy, but it could also push China to recession, as happened to Japan’s economy, thus dragging down the whole world. President Hu, when he delivered a speech on the 13th in the same meeting, insisted that he would fight to gradually improve the exchange rate system, thereby achieving a trade system that is free and balanced. In the meantime, other countries should not put too much pressure on his exchange rate reform. President Hu also stated that China will continue to follow the principles of initiation, controllability and progression, thus steadily changing the RMB exchange rate according to its own pace. On the 13th, not only did President Obama fail to receive other countries’ approval, but the speech given by President Hu also made him realize that China would gradually change its exchange rate system, and would not be rushed by anyone.
Other countries disapproved of the American currency policy
Last, in the meeting, what displeased with the leaders the most was the fact that, while America accused other countries manipulating their own currencies, the U.S. Federal Reserve Board (Fed), however, “printed” 600 billion dollars to buy bonds, an act that clearly contradicted with the words. There were three reasons why the Fed printed such large amount: First, it wanted to use these dollars to purchase bonds, so the U.S. export can be beneficial because of the devaluation of the U.S. dollar; second, it wanted to use these dollars to damage the value of the American bonds and dollars held by other countries; third, it wanted to use these dollars to force other countries to decrease their currency values as well.
Right now the currency war has not yet become a reality. However, when it does happen, nations will seek their competitive advantage by decrease their currency values. In the G-20 Summit, leaders from all countries sought an “exchange rate system directed by the market,” indicating that the RMB was undervalued. They also swore to fight to prevent “competitive devaluation,” which directly pointed to the United States. The leaders were worried that the Fed would ease its currency policy in order to decrease the dollar value, which strongly implied protectionism of its own economy.
In the APEC Summit, leaders of all countries aggressively pushed a growth strategy that would be beneficial to all nations in the region. Specifically, they focused and negotiated on the issues of fixing the trade imbalance and cultivating green industries. When the stagnant World Trade Organization (WTO) discussed polygonal trade negotiations, the leaders, including President Obama, settled in the anti-new protectionism strategy that was specific, prohibited export restriction and focused on early compromise. However, if the Fed continues to ease its currency policy, no doubt that President Obama did not mean to put it in action when he agreed and supported the anti-new protectionism.
It is a well accepted fact that diplomacy is just the extension of internal affairs. Defeated in the midterm election, Obama, whose plan was to use this Asian trip to demonstrate his diplomatic achievement, did not expect his failure in Korea or Japan, even though he found some success in India and Indonesia. If he does not change course when he returns to Washington and seek honest communication and strong cooperation with the opposing party, he will no doubt become an ineffective, “cripple” president. However, he also has the chance to win back if the economy can be prosperous during his term of presidency.
The author is a professor in the American research center in Danjiang University, Tanwan.
Before his trip to Asia, American president Barack Obama vowed to criticize China’s RMB exchange rate during each stop, including Mumbai, New Delhi, Jakarta, Seoul and Yokohama. However, in two consecutive summits, the G-20 and APEC, he didn’t expect the cold shoulder he received when he criticized China for manipulating the RMB exchange rate, in both Seoul and Yokohama. Many worried that if Obama does not change course, he will soon become a “cripple” president who does not have the capacity to get things done.
“Like the boy who cried 'wolf,' he died alone and haggard,” is a good metaphor to describe the fact that Obama was disfavored in Seoul and Yokohama, to say the least. The reasons were the following.
Asian countries disagreed with Obama’s criticism towards China
First, the main issue in the G-20 Summit was to prevent the so-called “currency war” from happening around the world. The main topic for the APEC Summit was “regional integration,” how to make the idea of “Asian Pacific Free Trade Circles” (FTAAP) more specific and concrete. Obama did not give any detailed proposals on how to avoid a currency war or how to accelerate regional integration; instead, he kept on beating the Chinese RMB exchange rate. It was not surprising that he was ignored by the Asian countries.
Secondly, the reason why leaders were indifferent to Obama’s criticism toward China for manipulating the RMB exchange rate was that, even though many countries agreed that the RMB exchange rate might be the reason for the U.S. trade deficit, it absolutely did not cause the global economy to get flushed down the toilet. What really caused the global economy to go downhill were the Americans’ subprime mortgages, chaotic banking system, inverted pyramid salary structure and off-tone capitalism. Instead of examining his own country’s faults, the President of the United States chose to blame China, whose economy was in better shape than the rest of the world after the global economic crisis. No wonder the other summit leaders thought little of Obama in this particular event.
Thirdly, in Nov. 11, 2010, during the meeting between Chinese president Hu Jintao and American president Barack Obama where they discussed the RMB exchange rate, President Hu pointed out that instead of the RMB exchange rate, it was America’s secondary quantitative easing that affected the interests of the developing countries. On the second day, Obama directly blamed China, stating that China’s “unfair trade” and its “currency exchange rate manipulation” would damage the recovering global economy. He also pointed out that as a country that “has large trade surpluses,” China should not become “overly dependent on exportation.” Each country’s exchange rate should “reflect its own economy truthfully.” He also attacked Beijing for spending billions to interfere with the market, thereby keeping the RMB in an undervalued status. He insisted that the Chinese government should ease its control over the currency and let the market decide the true value of the RMB.
On the 13th, Obama again pressured China in Yokohama and raised the issue of China using cheap RMB to boost its own exportation. He said, “A country that has a huge surplus must change its unhealthy dependence upon export, and it must take action to increase its domestic demand.” In the APEC Summit, he also stated that “no country should think that they can access the road to prosperity by exporting goods to the United States.” Apparently, if necessary, the United States may use its trade measures to limit some countries’ export to the U.S., countries who gain unfair trade advantages by interfering and manipulating their own currencies.
However, the leaders disagreed with Obama in the meetings. They thought that even if the RMB increased in value drastically, not only would it be unable to help save the U.S. economy, but it could also push China to recession, as happened to Japan’s economy, thus dragging down the whole world. President Hu, when he delivered a speech on the 13th in the same meeting, insisted that he would fight to gradually improve the exchange rate system, thereby achieving a trade system that is free and balanced. In the meantime, other countries should not put too much pressure on his exchange rate reform. President Hu also stated that China will continue to follow the principles of initiation, controllability and progression, thus steadily changing the RMB exchange rate according to its own pace. On the 13th, not only did President Obama fail to receive other countries’ approval, but the speech given by President Hu also made him realize that China would gradually change its exchange rate system, and would not be rushed by anyone.
Other countries disapproved of the American currency policy
Last, in the meeting, what displeased with the leaders the most was the fact that, while America accused other countries manipulating their own currencies, the U.S. Federal Reserve Board (Fed), however, “printed” 600 billion dollars to buy bonds, an act that clearly contradicted with the words. There were three reasons why the Fed printed such large amount: First, it wanted to use these dollars to purchase bonds, so the U.S. export can be beneficial because of the devaluation of the U.S. dollar; second, it wanted to use these dollars to damage the value of the American bonds and dollars held by other countries; third, it wanted to use these dollars to force other countries to decrease their currency values as well.
Right now the currency war has not yet become a reality. However, when it does happen, nations will seek their competitive advantage by decrease their currency values. In the G-20 Summit, leaders from all countries sought an “exchange rate system directed by the market,” indicating that the RMB was undervalued. They also swore to fight to prevent “competitive devaluation,” which directly pointed to the United States. The leaders were worried that the Fed would ease its currency policy in order to decrease the dollar value, which strongly implied protectionism of its own economy.
In the APEC Summit, leaders of all countries aggressively pushed a growth strategy that would be beneficial to all nations in the region. Specifically, they focused and negotiated on the issues of fixing the trade imbalance and cultivating green industries. When the stagnant World Trade Organization (WTO) discussed polygonal trade negotiations, the leaders, including President Obama, settled in the anti-new protectionism strategy that was specific, prohibited export restriction and focused on early compromise. However, if the Fed continues to ease its currency policy, no doubt that President Obama did not mean to put it in action when he agreed and supported the anti-new protectionism.
It is a well accepted fact that diplomacy is just the extension of internal affairs. Defeated in the midterm election, Obama, whose plan was to use this Asian trip to demonstrate his diplomatic achievement, did not expect his failure in Korea or Japan, even though he found some success in India and Indonesia. If he does not change course when he returns to Washington and seek honest communication and strong cooperation with the opposing party, he will no doubt become an ineffective, “cripple” president. However, he also has the chance to win back if the economy can be prosperous during his term of presidency.
The author is a professor in the American research center in Danjiang University, Tanwan.