I like that President Obama accords his Asian peers with respect, bowing if tradition calls for it, even though it raises the hackles of some wingnuts. But bowing to the wishes of China is another matter altogether. I'm completely underwhelmed with the results of the President's trip to China, especially with so much at stake. And I write this as someone who has had very high hopes for this Administration and its fresh approach to trade policy with China in particular.
U.S.-China relations are at "an all-time high" only if the Administration is referring to the levels of our bilateral trade deficit and debt financing. On every issue--exchange rates, market access, and even the terms of the broadcast of the town hall meeting--the President was outmaneuvered by a Chinese government that is growing in confidence every day.
A CNN poll released this weak revealed that more than 70% of Americans believe that China is a serious economic threat. I believe the Administration understands what is at stake, but politely and deferentially asking China to make changes is not likely to result in much success.
Most media analysis of the U.S.-China economic relationship has focused on our dependence on China for debt financing. It's true, but we do have other options. China, on the other hand, doesn't have an alternative to America's rich consumer market for its goods. America has much more leverage than most pundits think. And we can wield it without igniting a tit-for-tat trade war.
China, I believe, wants to be treated with the dignity and respect of a rising economic power. The Obama Administration should have made clear exactly how that could have been accomplished: Playing by the rules of global trade, achieving balance in its current account, and taking steps to ensure that more Chinese are able to share in the country's prosperity.
American voters have a visceral response to jobs shipped overseas, a trend that Obama said he would address as a candidate. Less than a year out from the mid-term elections, this looms as a major political problem, as well as an economic one.
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Without high tariffs or subsidies to promote the use of American workers, this will not change until wages are equalized and China removes their currency peg to the US$. Obama will run into big trouble with our primary banker if he moves too quickly.
So we print money, run up the debt, hide our defaults (toxic waste), while China must buy our treasuries to maintain their currency peg to support their export sector, propping up the dollar. We get to keep interest rates near zero which helps Wall Street borrow artificially cheap dollars to invest in Chinese assets (carry trade) and they have no choice but to weaken their currency to maintain their peg. They give us stuff. We give them dubious promises that we will pay them back.
So we do finance and military things, promote asset inflation bubbles. They produce, we extract. It's why we keep inventing new ways to carry more debt and sell it to them (hello derivatives and fiscal deficits). No wonder Cheney said "deficits don't matter".
Explains why Obama is so much like Bush on military spending and Wall Street.
This logic suggests we should spend as much as possible on everything we can think of so long as China is our banker.
And there certainly is not a tradition of Presidents of our country bowing to dictators and emperors.
To excuse Obama's symbolic bowing to China as "Bush's fault" is enabling.