Having just returned from a speaking tour in China and Singapore, I found the audiences there extremely interested in the perspectives of the Obama administration and the 111th Congress. And why not? Economic and trade policy decisions driven by this Congress and President will have a tremendous impact on Asia, as well as every other continent.

One evening in Nanjing, China, I had dinner in the building that formerly housed the American Embassy. During and prior to World War II, Nanjing was the capital of China. This city, which now is the capital of Jiangsu Province, suffered tremendously at the hands of the Japanese in what is known as the Nanjing Massacre. With a common cause, the United States and China became partners in an effort to defeat the Japanese. Today, for a variety of very important reasons, President Obama appears to view China as a partner and operate on the basis of friendship. However, the 111th Congress isn’t so sure.

Addressing Issues of Mutual Concern

The time between the two G20 meetings held in November 2008 in Washington, DC, and April 2009 in London, the World Bank says 17 members adopted 47 measures aimed at restricting trade. But unless this situation becomes worse, these protectionist concerns don’t appear to be on the short list of today’s most pressing issues. Why?

During the London G20 meeting, President Obama and Chinese President Hu Jintao agreed on the need to work together on today’s more urgent problems—and there are many. “Good relations with the U.S. is not only in the interests of the two peoples, but also beneficial to peace, stability and prosperity of the Asia-Pacific region, and the world at large,” Hu said. He could not be more correct.

China-U.S. joint efforts to pull the world out of severe recession, prevent further launches of North Korean multi-stage rockets, and diminish the strength of terrorists worldwide all are considered very serious issues deserving much attention, and requiring the U.S. and China to work closely together.

Congress and China

During the 110th Congress, approximately 20 bills were introduced that would have impacted U.S.-China economic relations if passed. According to the Congressional Research Service, these included H.R. 321, H.R. 782, H.R. 1002, H.R. 2942, S. 364, S. 796, S. 1607, and S. 1677, which addressed China’s currency policy.

That’s not all. H.R. 388 would have prohibited U.S. imports of Chinese autos as long as Chinese tariffs on autos are higher than U.S. tariffs. H.R. 708, H.R. 1229, and S. 974 would have applied U.S. countervailing laws to China, and H.R. 1958 and S. 571 would have terminated China’s Permanent Normal Trade Relations status. Additionally, H.R. 275 would have prohibited U.S. companies from aiding regimes that restricted Internet access, while S. 1919 would have limited the president’s discretion on Section 421 investigations on import surges from China, the Congressional Research Service said.

Additionally, numerous bills were introduced that addressed concerns over unsafe imports, including those from China. Aside from the safety issues, these bills did not receive enough Congressional attention to make it out of committee to the floor for passage.

Now with a unitary Congress, it appears likely that the 111th Congress will give President Obama a free hand to deal with sensitive issues involving China. What does this mean?

President Obama and China

Assuming President Obama receives this informal authority from the Democratically-controlled Congress to deal with China, he is likely to focus on greater enforcement of existing trade laws. Many in Washington, D.C., believe the President will appear non-confrontational in public, but—perhaps behind closed doors—be tougher on China than former President Bush was in order to prevent Congress from submitting a flurry of anti-China legislation.

Although this year has brought few anti-dumping trade remedies to the U.S. International Trade Commission by industry petitioners, some analysts feel more are likely to be brought forward if the economy worsens.

Problems Remain Amidst Cooperation

Although a political confrontation with China is unlikely in the short-term, many difficult trade issues with the Middle Kingdom do exist. For example, intellectual property piracy and product safety issues continue to be problematic. In addition, analysts say restrictive technology standards, price caps imposed on U.S. healthcare products, a complex investment -approval system, and discriminatory regulation of foreign service providers are among many issues that need to be better addressed.

On the other hand, China is boosting efforts to buy more American products. For example, in April U.S. and Chinese companies signed 32 business deals worth $10.6 billion. According to the Financial Times, Chinese Commerce Minister Chen Deming said, “History tells us that openness and cooperation are all the more important amidst a crisis.” Looking at the future, this is wise advice.

This article appeared in Impact Analysis, May-June 2009.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, competitive strategies and the latest economic trends. He also is founder of the ManzellaReport.com and Chief Strategy Officer of Ignition Life Solutions. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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