Obama and American Trade Policy With China

After nearly two years of intense competition, Obama was finally elected as the 44th president of the United States. This election is considered to be a historic event by many Americans. Many American ethnic minorities, including a number of African-Americans, consider Obama’s success as a symbol of the growing influence of ethnic minorities in American political life. American left-wing intellectuals and union activists envision that the Democratic Obama is the hope for weakening the influence of the Republican Party or neo-conservatism in the United States, while a lot of younger people believe that the White House’s new occupant will bring reforms to a deteriorating Washington; apparently, they are not concerned about what the reform will be as long as there is one. That is why Americans in general, particularly African-Americans and young people, have shown unprecedented political enthusiasm in this election.

White House Changes its Occupant, Beijing Becomes Anxious

Whether Obama can realize his election promises or whether he is able to bring the reforms expected by his supporters will be answered by history. According to American history, many presidents enthusiastically elected but then they quit the scene crestfallen in the end; many were not considered to be good presidents upon entering the White House, yet were later regarded as great presidents after their presidency.

No matter what Obama’s destiny is, the United States is number one economically, militarily and politically; the change of President as well as the leading thought among American voters and Candidates’ advocacy of each policy demonstrated during the election process have a non-ignorable influence to the rest of the world. After the participation in the economic globalization process for many years, the dependence on the world of China’s development is unexampled in terms of its width and depth. Therefore, Beijing is nervously watching the transition of American presidents and its effect on China.

In accordance with an individual country basis, the United States is the largest export market for Chinese products. Therefore, the trend of the American economy and the potential changes of foreign economic policy will not only have a direct influence on China’s foreign trade, but also an indirect influence on China’s economy through the impacts caused to other China’s trade and investment partners. It is not only because the export growth contributes up to 30 percent to China’s Gross National Product growth rate; but also because the number of job positions that China’s foreign trade has created is up to 120,000,000. Furthermore, China’s global trade surplus and huge foreign exchange reserves mainly come from the trade surplus with the United States.

Obama Will Toughen Economic Policy with China

Analyzing the current public speech, Obama’s stance is more hard-line than President Bush or the other presidential candidate, John McCain, concerning China’s economic policy. It is not hard to perceive that when we compare Obama and McCain’s view on international trade. McCain advocates “free trade” while Obama advocates “fair trade.” “Freedom” and “fair,” the dissimilarity of these two terms reflect a completely different trade view. However, this is not just a different point of view in ideology. More importantly, they have an absolutely opposite political philosophy and foundation of benefits in the country.

For example, the nation’s largest union – the AFL-CIO- supported Obama. This organization believes that in a big country with centralized power like China where basic labor rights are not guaranteed, labor costs have been artificially lowered; low-cost labor costs have then attracted a large number of American investors to China; therefore, China enjoys a huge surplus from the trade with America; this is a strongl reason why U.S. manufacturers lost their jobs. Trade union organizations assume that since the Reagan years, the international trade policy of either Republican or Democratic presidencies have both focused on looking after the American financial sector’s and the investors’ interests whilst industrial workers’ interest were neglected. They hope that Obama’s presidency will alter this situation.

Two weeks before the election, two other scholars and I were invited to the AFL-CIO headquarter to deliver a speech about globalization. The union leader told us that Obama had made a definitive commitment with the union organizations at the beginning of his campaign, claiming that he would implement a fair trade policy to protect American workers’ job opportunities. That is why the union organizations worked particularly hard for him. I also visited a pro-Obama election service center in the AFL-CIO headquarters building, where AFL-CIO had specially employed staff and set up 70 phones dedicated to Obama’s campaign. This call center is not only set up in the headquarters, but also in the union organizations all over the country. The union official who accompanied me said that the American union members and their family could affect 25 percent of the vote.

Trade Policy Adjustment with China Seems Traceable

Certainly, previous Democratic presidential candidates also asserted in their campaigns that they would take care of American workers’ interests concerning international trade policy; nevertheless, their achievement on this issue was not outstanding after their presidency. For example, former President Bill Clinton, who was strongly supported by union organizations, did not fulfill the commitments made to the union after the election. The union regarded his positive stance of setting up the Free Trade Area in North America as a betrayal of American workers. I asked the person in charge of trade unions whether they would punish or restrict Obama in some way if he were to act the same way. These union leaders said very seriously that Obama would not be like that. If Obama is the same as Clinton, the U.S. trade unions and workers would forgo their mild attitude and protest against the government on the street. Obama is very clear that its relevant impact on the American political environment cannot be underestimated.

Obama’s specific economic policy towards China is to be investigated. In the current international trade framework, the room of possible change of American trade policy is yet to be scrutinized. However, the commitment to American workers from this new president, the anxiety of American workers under the threat of economic crisis as well as the influential organizational power of this union will impact the new president’s economic policies. In fact, Obama once again criticized the Chinese government’s manipulation of RMB exchange rate and its impact on the U.S. unemployment in a public speech five days before he was elected. This should be perceived as a signal of possible adjustment of trade policies with China.