Kenneth Lieberthal on China:
During Monday night's foreign-policy debate, both candidates sounded the same three themes on China. First, there is no inherent conflict between the United States and China and there is the potential for a great partnership in the future (Republican nominee Mitt Romney was surprisingly expansive on this, though President Barack Obama did label China an "adversary" for the first time). Second, to realize this partnership, China must stop cheating on the rules in economics and trade -- stealing intellectual property, counterfeiting goods, etc. And third, how effectively America handles its own domestic problems will have a major impact on the long-term U.S. relationship with China.
These have been Obama's themes in one form or another throughout his first term and this campaign. On Romney's side, they reflect his decision in this debate to project himself as a moderate -- one who will not lead the United States into a new war, who recognizes the need to win over support abroad through aid and diplomacy, and who has the character and good judgment to be president. In short, Romney was prepared to allow very little daylight between himself and Obama in a bid to allay fears about where he would lead America abroad -- and this was particularly evident in the discussion of China.
Romney's one serious mistake was in reiterating his determination to declare China a "currency manipulator on Day 1." This is a campaign position that makes no sense. First, the governor is 4-5 years too late -- at 2.1 percent of GDP for the first half of 2012, China's current account surplus is well below the 4 percent level that the United States argues should be the global standard for what is troubling. Second, dozens of countries, including Switzerland and Israel, use government action to influence the value of their currency -- but the United States has never declared any of them to be a "currency manipulator." Third, the designation is gratuitous. All it would mandate is that the United States engage in intensive negotiations with China on its currency policy, something America has done for years. This designation does not increase the president's authority to impose tariffs. Fourth, contrary to the governor's assertion, China's incoming new leader, Xi Jinping, will feel compelled to take strong countermeasures if Romney approves this designation. Xi will feel he must show Romney that this is a very bad way to elicit Chinese cooperation; he also must show his own countrymen that he will not begin his term by caving in to U.S. bullying. The risk of a trade war developing out of this gratuitous action is thus very real. By any reasonable cost-benefit calculation, "designating China a currency manipulator on Day 1" is a big loser.
More broadly, Romney reiterated in this debate that he is committed to increasing defense spending to at least 4 percent of GDP. He has previously linked that to the U.S. posture in Asia and argued that our friends and allies there think the U.S. pivot to Asia lacks substance. Our allies and friends in Asia do worry about the nature and sustainability of our commitment to the region, but arbitrarily raising the defense budget will likely worsen rather than reduce their concerns. That's for two reasons. First, their biggest worry is that the United States will fail to get on top of its fiscal deficit, thus undermining the long-term U.S. economic strength that underpins our ability to deal with China in Asia. Arbitrarily and significantly increasing defense spending will likely sharpen this concern. Second, they do not want a Cold War to develop between the United States and China that will force them to make a very unwelcome choice between the two -- and thus their critique to date is that the U.S. pivot to Asia has been too provocative and unbalanced in that it has overstressed military moves to the relative neglect of diplomatic and economic/trade initiatives. Romney's debate performance will hit the wrong nerve on this issue.
Obama's brief criticism of Romney for investing in China continues a theme that does not do the president proud. Bain's and Romney's investments in China are not evil; they are reasonable decisions, given the rules and incentives in our system. To change the outcome, it is necessary to change the rules (or the prices in the market).
One of the biggest factors shaping future U.S.-China relations was very much the focus of the debate -- that is, the long-term credibility of the U.S. economic recovery and policies to bend the curve on our fiscal deficit. The attention to this issue, within the overall focus on the three points noted above, made this brief and extremely superficial discussion of China somewhat higher quality than the presidential campaign has produced before tonight. There were few differences between the two candidates on China in this debate -- which reflects Romney's movement, at least for the evening, sharply in the direction of Obama's basic strategy.
Kenneth Lieberthal is senior fellow in the John L. Thornton China Center at the Brookings Institution. He served as the National Security Council’s senior director for Asia during U.S. President Bill Clinton's administration.