President Barack Obama countered Republican attacks on his trade record with China by filing a complaint seeking to stop Beijing’s export limits on rare earth materials, a policy the president said hurt American manufacturing jobs.
“You will not get away with skirting the rules,” Obama said yesterday in front of television cameras at the White House. While the U.S. prefers “dialogue” on trade issues, “I will take action if our workers and our businesses are being subjected to unfair practices,” he said.
The complaint to the World Trade Organization, in coordination with the European Union and Japan, was made the same day Alabama and Mississippi were holding primary elections and Hawaii was holding caucuses. Republican presidential candidates, such as former Massachusetts Governor Mitt Romney, have accused Obama of failing to stand up to China’s rising economic and military power.
The economy has been a central issue as Obama seeks re- election. The U.S. unemployment rate has been stuck above 8 percent for three years. Polls show voters are concerned about the loss of manufacturing jobs to foreign competition.
The U.S.-China trade deficit widened to $295 billion last year, spurring calls from some Democrats in Congress as well as Republicans for stronger action to rebalance the relationship.
Douglas Paal, director of the Asia program at the Carnegie Endowment for International Peace in Washington, said the political purpose in Obama’s announcement was “transparent.”
Obama is “trying to look tough on China in the election because Romney has set himself out to try and out-toughen Obama,” Paal said.
Romney wrote in the Feb. 16 Wall Street Journal that, if elected, he would designate China as a currency manipulator on his first day in office.
Obama is “moving in precisely the wrong direction” on China and has been “a near supplicant to Beijing,” Romney wrote.
Obama sought to bolster the case that he has regularly stood up to China. He said yesterday that his administration has “brought trade cases against China at nearly twice the rate” as his predecessor, George W. Bush.
The Obama administration has filed five WTO complaints against China since taking office three years ago, compared with seven Bush filed from 2001, when China joined the Geneva-based trade arbiter, through the end of his term in January 2009.
Spokesman Denies Politics
Obama’s spokesman, Jay Carney, denied politics played a role in the decision. The action on rare earth materials is consistent with the president’s approach on trade since he took office, he said.
“We’ve been at this for three years because it’s the right thing to do,” Carney told reporters at the White House.
Yesterday’s event marked the third time since last month that Obama has scheduled events that highlighted his concerns for middle-income Americans on the same day that the Republicans were holding primaries and caucuses.
On Feb. 28, the same day as primaries in Arizona and Michigan, Obama delivered a campaign-style speech to a United Auto Workers conference to promote the government bailouts of General Motors Co. (GM) and Chrysler Group LLC.
When Republicans were going to polls for the March 6 “Super Tuesday” round of contests, the administration announced that the Federal Housing Administration would lower mortgage insurance premiums as part of Obama’s plan to boost the housing market.
Obama’s re-election was endorsed today by the AFL-CIO, the largest U.S. labor federation. The group’s president, Richard Trumka, cited the WTO complaint when asked what Obama needed to do to win a second term.
“Keep talking about enforcing the trade laws and how he represents workers and stands for middle class and he’ll get reelected,” Trumka told reporters at the AFL-CIO’s executive council meeting in Orlando, Florida.
At issue in the WTO complaint is China’s decision to curb output and exports of rare earth materials, 17 chemically similar metallic elements used in products in such as Boeing Co. (BA) helicopter blades, Nokia Oyj (NOK1V) cell phones and Toyota Motor Corp. (7203) hybrid cars. China produces at least 90 percent of the world’s rare earth materials.
“Few if any trade issues have been as heated in the last several years as rare earths,” China’s official Xinhua News Agency wrote yesterday in an unsigned commentary. “It’s predictable that the United States would bring the matter out under fierce election-year pressures at home.”
The WTO complaint, in which the U.S. is joined with Japan and the European Union, adds to pressure the U.S. is piling on China. Obama is calling for efforts to help balance the trade deficit with the Asian nation and for China to allow the yuan to appreciate.
The People’s Bank of China yesterday set the currency’s daily fixing 0.04 percent stronger at 6.3259 per dollar after weakening it by 0.33 percent the day before, the most since August 2010.
The resolution of the WTO case may take two to three years, said Jeremie Waterman, senior policy adviser for Asia at the U.S. Chamber of Commerce, the nation’s largest business lobbying group.
Waterman said he supports the complaint and rejects the idea that the move is political. Still, he added, “We should have no illusions that this is a panacea.”
“China could continue to have the ability to restrict future supply, assuming it moves forward with ongoing efforts to consolidate and restrict production, in a way that can impact foreign companies,” he said.
In response to yesterday’s announcement, China may “retaliate in a way that’s proportional, without throwing down the gauntlet,” said Charles Kupchan, professor of international affairs at Georgetown University in Washington and a senior fellow at the Council on Foreign Relations.
The Chinese will understand the political pressure Obama faces and “neither side wants a big row right now,” he said.
“It is perhaps a desirable place for picking a fight precisely because it’s not an issue with huge economic implications, and in that sense the case slaps China on the wrist but minimizes the risk of tit-for-tat protectionism,” Kupchan said.
The WTO complaint “is very nice rhetoric” that Obama “can refer to a thousand times on the campaign trail and at fundraisers that plays with blue collar workers who are very disgruntled with Obama,” Paal said.
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