There is a wisdom in delay that is rarely acknowledged in this age of the 24-hour news cycle. The Obama administration is now busily attempting to apply this insight when it comes to dealing with Beijing. I just wonder if we could convince the White House that certain stall tactics might best be employed on a permanent basis. I refer here, of course, to Treasury's forthcoming currency report and the Department of Defense annual statement on Chinese military power. Neither document suffers a surplus of academic honesty nor serves to enhance decision-making. So, at the risk of sounding rational, I would argue we do away with both and consider more appropriate means of engaging audiences at home and abroad.
Thinking of foreign affairs, who misplaced the charts and furloughed the skipper charged with managing our relationship with China? Over the last four months, Washington has seemed determined to run aground on any and all issues related to China. First, Secretary of State Clinton fires off a speech on internet freedoms that appeared more intent on serving Google's bottom line than protecting America's national interests. Then the White House notifies Congress of a decision to sell Taiwan $6.4 billion in new armaments. Not less than two weeks later the Dalai Lama shows up at 1600 Pennsylvania Avenue. Add to that a disagreement over how to deal with Tehran and a letter from 130 members of Congress demanding Chinese currency reform, and one is left to conclude the crew sailing Washington's China policy is underway without a rudder.
But at the seeming last moment, we have been spared the shoals. On 31 March, Beijing agreed to serious negotiations with Washington and other Western nations on proposed United Nations sanctions aimed at Iran's nuclear program. On 1 April, China announced President Hu Jintao would attend the 12-13 April nuclear security summit, a move accompanied by a one-hour phone conversation between Hu and Obama. And then we get Treasury Secretary Geithner's 3 April decision to delay publication of the currency report. Suddenly things are looking up for Sino-U.S. relations--cooler heads do seem to have once again seized control of Washington's foreign policy apparatus.
That said, Beijing should have been able to predict Geithner's decision. In early March, the World Journal reported the Department of Defense annual report on Chinese military power would likely not be released until May--a 60-90 day delay. The reason for this stall tactic? A White House campaign to win Hu's support for the mid-April nuclear security conference.
Having succeeded in the short term, Mr. Obama should now consider leaving the Pentagon report in a storage locker for another six months. As I note in China Restored: The Middle Kingdom Looks to 2020 and Beyond, "Military Power of the People's Republic of China" first hit the street in 2002. Foisted upon the Secretary of Defense in the National Defense Authorization Act for Fiscal Year 2000, the report is a bit of political theater intended to hype the Chinese threat. Year after year the Chinese military is depicted as force being honed for "broader regional and global objectives" with no mention of the fact every state is entitled to a capable self-defense.
Needless to say, Beijing is none-too-impressed with the sanctimony implicit in the report's annual release. The Chinese government has soundly condemned the document on multiple occasions, and Washington has routinely ignored the feedback. This attitude was singularly unsurprising when George Bush occupied the White House. Any administration that blesses preemptive strikes as a legitimate form of self-defense is unlikely to be deterred by angry verbiage shouted across the Pacific. It seems we can hope for better from the Obama team. Oh, I suspect the 2010 version of "Military Power of the People's Republic of China" will eventually see the light of day. It just won't be for sale on a schedule that waylays good, old-fashioned diplomacy. Who knows, perhaps the report writers will even be asked to insert a bit of balance during the extended period provided for edits.
The same fate, I hope, awaits the semi-annual Treasury report. The last time this document actually identified a potential currency manipulator was in 1994. Yes, you read that correctly, 1994. Now consider for a moment the exchange rate South Korea maintains against the U.S. dollar. Prior to the 1997-98 Asian economic crisis, the South Korean won traded at approximately 800 to 1 dollar. Since 1999, Seoul has actively worked to ensure the won-dollar exchange rate remains at about 1,100 to 1. In the meantime, South Korea, with a population of 49 million, has emerged as the world's 8th largest exporter and is firmly entrenched in the G-20. One has to wonder how many U.S. jobs were lost to officially-subsidized South Korean automotive and electronics exporters--without a peep from the Congress or the Treasury.
So if the Treasury report is so blatantly political, why do we continue publishing the damn thing? Well, the White House is legally required to produce this document twice a year--on 15 October and 15 April. Furthermore, the report authors are tasked with determining if other countries are manipulating exchange rates, "for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade." Gosh, Wally, it would appear as though South Korea certainly fits into that category. And yet, no press to list Seoul in book of shame.
Not that anyone should be overly concerned about making the list. According to the 1988 law, once a nation is identified as a currency manipulator the Treasury is merely instructed to "initiate negotiations with such foreign countries on an expedited basis...for the purpose of ensuring such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar." I don't know about you, but the "threat" of negotiations doesn't rattle me--and I would bet Beijing has similar feelings. (In fact, I know that's the case--between 1992 and 1994 the Treasury report listed China as a currency manipulator...and nothing significant emerged from the resulting talks.)
Where does this leave us? Well, in a further effort to hone Beijing's reputation as a responsible member of the international community, Hu Jintao has declared the yuan will be allowed appreciate "based on [China's] own economic and social-development needs." (A crafty way of appeasing the White House and Congress without appearing to kowtow to Western demands.) Mr. Geithner and his aides will be allowed to interpret this statement as a pledge to cease the current yuan-dollar lock. And the semi-annual report will publish without naming China as a currency manipulator.
Whew, everyone seems to have escaped the bullet and Washington can now get back to crafting a pragmatic relationship with Beijing. Well, almost. President Obama, Mr. Geithner, and the Chinese leadership still have to sell the deal to Congress. I have yet to hear senators Graham or Schumer express interest in the wisdom of delay. Instead, we continue to witness table pounding and jingoist rhetoric. These tactics may impress the average American voter--but what sells in Peoria is unlikely to play well in Beijing. As President Hu so ably noted, "Detailed measures for reform should be considered in the context of the world's economic situation, its development and changes as well as China's economic conditions. It won't be advanced by any foreign pressure."
Washington--or at least Capitol Hill--would be well-served by heeding those words. China is not going to be compelled into adopting a more flexible monetary policy. Beijing must be convinced there is a sound reason for moving away from the current exchange rate, and that convincing must sound as though it were written in China--not the marble halls of the Russell or Hart senate office buildings. In short, Washington must exercise patience while Beijing fiddles. President Obama seems to understand we have few other options. Let us hope our elected representatives can come to a similar enlightened realization.