Sol Sanders Archive

Unintended consequences: Help for Obamanomics?

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Early signs of that could come in fresh progress on free-trade agreements the Bush administration negotiated with Panama and Colombia. While support for and opposition to trade issues cut across party lines, the incoming Republican House majority and a chastened Senate Democratic majority — nearly half of whom are up for re-election in two years — are likely to be more "business-friendly."

Final touches to a more politically sensitive South Korean pact — which could add $10 billion in exports annually to the $60 billion bilateral trade tally — could come during Mr. Obama's current high-profile Asian tour.

Along with repaying some protocol debts, the ostensible purpose of Mr. Obama's journey is to push his goal of doubling American exports, heading the most expensive presidential delegation ever through four Asian countries in 11 days, with a look-in on three multinational economic conferences. Opening up new markets had been blocked by the protectionist lobby in his own Democratic Party. But the unions who threw tens of millions of dollars into the campaign, in many cases backing failed candidates, will find their Capitol Hill clout on trade issues curbed.

Despite the changed dynamic in Washington, nothing Mr. Obama can achieve in India promises all that much right away. He will formally embrace President George W. Bush's "open sesame" policy of technology access for the Indians and will talk up some military aircraft sales, hoping for far more.

But the administration has also warned India it will continue to try to slow information-technology outsourcing. Washington claims Indian call centers and software firms are costing U.S. jobs, this after an election in which unemployment proved to be the voters' chief concern. Never mind that several Indian multinational software companies have operations in Silicon Valley and have been among the president's most enthusiastic backers. That won't make the visit easier for Prime Minister Manmohan Singh, facing his own domestic protectionist pressures in sectors such as retail and the snail-like privatization of huge Indian state companies — both targets for which American multinationals salivate.

The whirlwind tour barely touches down in Indonesia, Mr. Obama's childhood home where his advisers once hoped a twice-postponed visit would embellish his international image and reinforce his appeal to the Muslim world. That initiative is on life support — given Islamist terrorist attempts on the eve of his departure, the intractable Iran nuclear weapons dispute and increasing friction with Turkey. It was in Ankara that Mr. Obama made his ambitious oratorical appeal to the Islamic world shortly after he took office.

The increasingly muddled political outlook in Egypt, where the president again offered a rhetorical live branch to the Muslim world, is just short of crisis. In Jakarta, repeating platitudes about Muslim "moderation," Mr. Obama will be lucky if he can get renewed promises against fierce restrictions on foreign investment for the long-postponed search for new fossil fuels against Chinese competition.

Both the president's Japan visit and the Group of 20 summit in Seoul are going to be overshadowed by growing concern over China's intentions. It is, after all, Beijing's massive trade and payments surpluses that are Washington's major international economic concern these days.

Treasury Secretary Timothy F. Geithner renews his haggling with the Chinese, this time carrying new weapons. Taking a leaf from British economist John Maynard Keynes, Mr. Geithner argues that surplus countries as well as deficit economies must shoulder responsibility for international trade imbalances. He has offered up a woolly concept whereby surpluses should be measured against gross domestic product. If a country exceeds that cap, it should be forced to reduce surpluses through, presumably, domestic spending and increased imports.

The argument was a turn away from a frontal attack on Beijing's notoriously undervalued currency and its extensive export subsidies. At first, Beijing coyly welcomed any feint that promised an ending to the nasty currency debate. But just days before the G-20 convened, Chinese officials furiously attacked the new American tack. In any case, the new hard-liners in Congress might well ask how such a grandiloquent concept is to be implemented, especially given Beijing's lackadaisical attitude toward international agreements. Dearer to their hearts is the second U.S. initiative: a welter of complaints filed against China before the World Trade Organization, asking cease-and-desist orders and penalties for suspected Chinese transgressions.

In another part of the forest, to a chorus of complaints from many of America's trading partners, Federal Reserve Chairman Ben S. Bernanke has again opened the spigot for another half-trillion dollars of U.S. liquidity through Fed purchases of U.S. Treasury debt. Many Asian countries are worried that the U.S. move will divert an avalanche of investment in their direction, further aggravating rising domestic prices and hurting exports. The Europeans, by and large going in the opposite direction to the U.S. on government spending and stimulus, worry too that the Fed move will further discombobulate the euro, as the German export boom tapers off and refinancing southern Europe gets more costly by the day. But if additional "stimulus" further cheapens the dollar, it could make American exports even more a bargain — for those countries willing to let them in.