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Obama Pacific Visit: President Asserts Growing US Stake In Asia

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OBAMA ASIA CHINA AUSTRALIA FOREIGN POLICY
US President Barack Obama addresses the Australian Parliament on the second day of his 2-day visit to Australia, on November 17, 2011 in Canberra, Australia. The President will this afternoon fly to Darwin to lay a wreath at the USS Peary Memorial, and visit the RAAF base, where US Army Air Force units were established during World War II. (Photo by Greg Wood-Pool/Getty Images) | Getty Images

WASHINGTON — President Barack Obama's close attention to the Asia-Pacific region signaled both a turn toward a part of the world experiencing solid growth and one away from Europe's dark economic woes, at least temporarily.

The president's nine-day trip to Hawaii, Australia and Indonesia was marked by back-to-back summits and high-profile pronouncements, including decisions to station U.S. Marines in northern Australia, advocate a new free-trade area that leaves China out and call on Beijing not to buck the current world order.

He also made an overture to isolated, repressive Myanmar, also known as Burma, dispatching Secretary of State Hillary Rodham Clinton there next month and speaking by phone with peace activist and Nobel laureate Aung San Suu Kyi.

With Europe's growth stalled, and the continent teetering on the edge of another recession, Obama redirected his focus across the Pacific to an area largely out of recession and steadily growing – and which now accounts for roughly 50 percent of the world's economic output.

America's standing in Asia-Pacific has declined in the past decade as China's has increased. China now is the top trading partner for many countries across the region.

Obama portrayed his trip and his new, muscular approach toward China as an effort to help open new Asian markets that could lead to more jobs in the U.S. as he strives to help get the nation's economy back on track, a big order ahead of next year's presidential election.

He was able to perform as an active player in the summits in Hawaii and Bali, Indonesia, and in his visit to Australia – after finding himself largely on the sidelines in efforts to resolve the euro zone's deepening debt crisis.

Obama's goal "is clearly a rebalancing on the economic side and Europe's current economic situation starkly underlines that," said Ernest Bower, director of Southeast Asia programs at the Center for Strategic and International Studies. "Europe is flat on its back, and Asia is growing like a snowball rolling down a hill."

Obama's return to the land of gridlock was abrupt. As Obama signed into law rare bipartisan legislation to give companies tax breaks for hiring unemployed military veterans, a special 12-member congressional panel was poised on Monday to declare complete failure in its attempt to bring federal deficits down $1.2 trillion over 10 years.

That failure caused stock markets in the U.S. and Europe to tumble, with the Dow industrials plunging more than 300 points. Obama urged congressional negotiators not to give up.

He also called the new Italian prime minister, Mario Monti, who took power while Obama was out of the country. White House spokesman Jay Carney said Obama thanked Monti "for taking on such a significant responsibility at a critical time."

Also, Carney called the Asia-Pacific trip one of "substantial accomplishments" that he said would make clear the United States "will be all in when it comes to Asia."

China was the first major world economy to emerge from the 2008 financial crisis. And while it is has struggled to keep inflation at bay, it recently roared past Japan to become the world's second-largest economy. It's on track to overtake the U.S. and become No. 1 within the next few decades.

The financial-system meltdown that hobbled the U.S. and its European allies bypassed Australia and many of its neighbors. And while Japan is still struggling to recover, many of the region's other economies are exhibiting healthy growth.

Obama pledged greater involvement in a wide array of regional security and economic concerns as the U.S. ratchets down its military presence in the Middle East with the withdrawal of U.S. troops from Iraq; and as it seeks to extricate itself from Afghanistan.

"The Asian economies are the fastest growing economies on the planet. It's where the action is, where U.S. businesses are increasingly looking for growth," said Mark Zandi, chief economist at Moody's Analytics. "We've got to be looking toward Asia. Europe is in trouble."

Rapid growth of Asian economies could help offset weaknesses in Europe. Still, China and several other Asian exporting countries do substantial business selling their goods in European countries.

Treasury Secretary Timothy Geithner warned that the European crisis is still "the central challenge to global growth" and urged Asia-Pacific leaders to do more to help keep the European contagion from spreading, including boosting demand in their own countries.

Still, economists generally say that so long as any new recession in Europe is relatively mild, it seems unlikely that it would drag down other economies.

"Asia is in ascendency while Europe is fading in the power lineup of the world," said Allen Sinai, chief global economist at Decision Economics. He said the new U.S. focus on the region "is long overdue."

Obama's trip follows congressional approval of a free-trade pact with South Korea, initially negotiated by the Bush administration. The president said the pact would help open the big South Korean market to U.S. goods and services and help create badly needed jobs in the United States.

With unemployment hovering at a stubbornly high 9 percent, and congressional negotiators straining to meet a November 23 deadline for delivering a deficit-cutting plan, Obama did take some heat from Republicans for leaving the country instead of focusing on domestic priorities, even as he promoted job-creation as a key part of his mission .

And a few Democrats voiced skepticism about some aspects of the trip.

"I guess the strategic purpose, we're told, is we have to contain China. I think we overdo that," said Rep. Barney Frank of Massachusetts, the senior Democrat on the House Financial Services Committee.

"We have a legitimate strategic interest in deterring North Korea and in giving Taiwan some assurance, but I don't think we have to keep open the sea lanes. I don't think we have to mediate every dispute ... in the South China Sea," Frank told a foreign-policy forum. "I do not think that China is prepared to commit economic suicide by shutting down the sea lanes."

Many lawmakers blame China for America's economic woes. It is one of the few issues on which many Democrats and Republicans agree.

By a wide bipartisan margin, the Senate last month passed a bill to punish China for deliberately undervaluing its currency, a practice that makes Chinese products cheaper in the United States – at a time when the U.S. manufacturing sector is struggling and jobs are scarce.

Lawmakers have also reached across the aisle to condemn Beijing for human rights abuses, intellectual property theft and the counterfeiting of components that end up in U.S. military hardware.

House Speaker John Boehner, R-Ohio, has thus far declined to take up the Senate China currency, agreeing with business interests that it could hurt, not help, the U.S. economy by triggering a trade war.

China has also become a hot political issue on the GOP presidential campaign trail. Former Massachusetts Gov. Mitt Romney has said that, if elected, he would seek to sanction China as a currency manipulator on Day One of his presidency. Rep. Michele Bachmann of Minnesota suggests, without offering evidence, that the U.S. is helping to subsidize China's People's Liberation Army with the interest payments it makes to China on the debt.

Only former Utah Gov. Jon Huntsman – who recently was U.S. ambassador to China – warns against actions against China that could result in trade retaliation. He is a former U.S. ambassador to China.

As to borrowing from China to help cover U.S. budget deficits, China buys Treasury bonds the same way as other countries, mutual and pension funds and individual investors do – on the open market.

Last year, the federal government paid about $206 billion in interest for the portion of the national debt held by the public. China holds about 11 percent of that debt, making it the largest foreign creditor.

"I do think that in this populist age, a little China-bashing never hurts politically," said Norman Ornstein of the American Enterprise Institute.

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Follow Tom Raum at http://twitter.com/tomraum

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