Friday, November 13, 2009
PRESIDENT OBAMA has a busy week ahead in Asia. His meetings in Tokyo, Singapore, Beijing and Seoul will touch on repression in Burma, U.S. military bases in Japan and the pursuit of nuclear weapons in North Korea. But as the leader of a nation struggling with 10.2 percent unemployment, Mr. Obama must also focus on the U.S. economic relationship with the world's most dynamic region.
The most delicate problem is rebalancing trade and investment flows between the United States and China. To boost its exports, China continues to peg its currency to the declining dollar. This makes it more difficult for the United States and other Asian countries to claim their share of regional trade. The latest danger sign was heavy government dollar-buying by Russia, South Korea, Thailand and the Philippines in a damage-control effort that is probably doomed in practical terms but significant as a measure of these countries' concerns. The Obama administration has correctly called on China and other Asian countries to increase domestic consumption; equally justifiably, the region is demanding convincing signs of fiscal discipline from the United States.
U.S. trade policy, or the lack thereof, is the other major threat to American economic competitiveness in Asia. In 2007, Congress, controlled by Democrats, allowed presidential fast-track authority for future trade deals to expire. Not that Mr. Obama necessarily would use it. The most significant trade action of his administration so far has been to slap a tariff on Chinese tire imports, as requested by the steelworkers union. A U.S.-South Korea free-trade agreement negotiated by the Bush administration has gone unratified for more than two years. Under the Korea trade deal, 95 percent of consumer and industrial products would become duty-free in three years, boosting American exports to South Korea by $10 billion annually, according to government estimates. The vast majority of American businesses supported it. But the United Auto Workers -- along with Ford and Chrysler, but not General Motors -- opposed the deal, insisting on linkage between future U.S. tariff reductions and increased sales of U.S. cars in South Korea.
Mr. Obama's administration is engaged in a "review" of the Korea deal, with the declared aim of addressing the car issue. But the Koreans are not holding their breath. Instead, Seoul concluded an agreement with the European Union that will give E.U.-based companies an advantage over U.S. competitors in the trillion-dollar Korean market. In addition, Asian nations are tearing down trade barriers among themselves, on the way to forming a kind of regional free-trade area. The Asia-Pacific region accounts for more than half of the world's gross domestic product and 44 percent of all global trade. It is the destination of most U.S. exports. Yet the United States risks being left out unless Mr. Obama takes steps to reinvigorate American trade policy -- the first of which should be setting the South Korea free-trade pact on the road to ratification at last.