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November 12, 2011

Amid Real Results, Romney Talks Tough on China
Posted by Jacob Stokes

  

In tonight’s foreign policy debate, Romney reiterated his newest stance on China and trade, saying we need to bring China to the WTO on charges of currency manipulation (see video above). Challenger Jon Huntsman, former ambassador to China, quickly responded to Romney that such a policy would not work. Dan Drezner, who teaches international politics and economics at Tufts University, says Huntsman is right. He tweeted, “The WTO will rule against the US for tariffs based on currency manipulation.”

That said, Romney is right the Chinese currency is undervalued. The current administration has been very clear on this point. Just today President Obama called out Chinese currency manipulation with Chinese President Hu Jintao in the room. Where the two diverge is how to go about changing that dynamic.

The best way to get China to appreciate its currency is to work with a coalition of countries who are affected by the manipulation of the yuan. Obama has been pulling together just such a coalition, and last week at the G20 we saw results. The final statement contained strong language pushing for China to move on the currency issues. And in last few days the Chinese agreed at the Asia-Pacific Economic Cooperation forum that they would begin to appreciate their currency more rapidly. 

The currency issue is one among many issues that animate the Sino-American relationship. While the currency issue needs attention and has been receiving a great deal, unilateral harsh sanctions of the type Romney is suggesting run the risk of derailing the relationship completely and, possibly, starting a trade war. (They would likely also be illegal under international trade law, as noted above.) The current strategy – firm, consistent pressure that works to get results without breaking the broader relationship – is much more effective.

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