Campaign Promises

Cabinet/Departments -> State -> China

The Promise: "...will use all diplomatic means at his disposal to achieve change in China's manipulation of the value of its currency, a practice that contributes to massive global imbalances and provides Chinese companies with an unfair competitive advantage."
When/Where: Obama-Biden Plan: "Protecting U.S. Interests and Advancing American Values in our Relationship with China" dated 09/11/08.
Status:American manufacturers consider the Chinese yuan (also called the "renminbi") to be undervalued by about 40%, contributing to the USA's massive trade deficit with China and the loss of millions of American jobs.

On 07/08/10, the Obama Administration announced that it would not make an issue of China's apparent currency manipulation to gain an unfair trade imbalance. Chinese Premier Wen Jiabao stated on 09/22/10 that the exchange rate of the yuan is not the "main cause" of the bilateral trade imbalance and that the $26.2B U.S. trade deficit with China (as of 06/10) is not intentional.

On 09/29/10, the House passed the Currency Reform for Fair Trade Act (H.R. 2378) introduced by Congressman Timothy Ryan (D-OH). This bill died with the 111th Congress at the end of CY2010.

Changing course, President Obama tried to get leading economic powers to follow his plan to end global trade imbalances during the 11/10 G-20 Summit in Korea. He was soundly rebuffed, as the U.S. became increasingly impotent in pushing its agenda on the world stage. President Obama's sour reaction was to refer to the yuan issue as an "irritant," a statement that won't help assuage rising tensions between the U.S. and China.

In advance of Chinese President Hu Jintau's visit to Washington in 01/11, Hu stated that the current domination of the U.S. dollar on the world currency stage was a "product of the past." He emphasized China's efforts to transform the yuan into a global currency.

While no meaningful progress was made during President Hu's 01/11 visit to the USA to change China's manipulation of its currency, it must be recognized that the yaun appreciated by about 5% from mid-CY2010 to mid-CY2011. This appreciation is inconsistent with the rise of other currencies such as the Japanese yen, Euro, or British pound over the same timeframe.

On 09/22/11, Senator Sherrod Brown (D-OH) introduced the Currency Exchange Rate Oversight Reform Act of 2011 (S. 1619). The Senate voted in favor of this bill (79-19) on 10/04/11, but as of end-CY2012, this bill had not passed the Republican-controlled House. It expired with the 112th Congress at the end of CY2012.

During the 11/12-13/11 Asia-Pacific Economic Cooperation (APEC) conference in Hawaii, President Obama used strong language to press China to reform the U.S. belief that China's currency is kept artificially low, thereby keeping American businesses at a disadvantage and driving up China's trade surpluses. As in the past, China pushed back against this pressure with Chinese President Hu Jintau telling President Obama that "China's foreign exchange policy is a responsible one," and that China will "continue reforming its exchange rate mechanism." Translation: the Chinese will not soon reform the manipulation of their currency.

On 12/28/11, the Obama Administration decided not to designate China as a currency manipulator, preferring to accept China's undervaluation of the Chinese yuan and avoid a potential trade war rooted in low export prices against high import costs.

This promise is not being fulfilled.
The Promise: "...will insist that our imports from China and other countries be safe."
When/Where: Obama-Biden Plan: "Protecting U.S. Interests and Advancing American Values in our Relationship with China" dated 09/11/08.
Status:During the first term of the Obama Administration, concerns prevailed over the safety of Chinese products. These concerns ranged from much-publicized corrosive effects of Chinese-manufactured drywall with hydrogen sulfide content (affecting more than 20K homes), to lead content in children's toys, to defective tires.

A Memorandum of Understanding (MOU) was signed between the U.S. Consumer Product Safety Commission (CPSC) and China's General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) back in CY2004. Its provisions were generally ignored by China largely due to the absence of cooperation and reciprocal inspections.

The CPSC signed another MOU in 04/10, but this one was with the U.S. Customs and Border Protection (CBP) organization, following an increase in civil penalties from $8K to $100K for each violation of the Consumer Product Safety Improvements Act of 2008 and from $1.8M to $15M for repeated violations. This 04/10 MOU mandated the allocation of increased CBP resources to inspect and prevent noncompliant products from entering the USA. The new rules apply to all imports -- not only those from China.

China objected to the 04/10 MOU between the CPSC and CBP, and cited it as an example of American protectionism, further exacerbating an already strained bilateral trade relationship. With other pressing issues at hand such as economic relations, China's military buildup, North Korea's nuclear capabilities buildup and its provocative actions in the region, this import concern was not brought up during Chinese President Hu Jintao's visit to the USA in 01/11.

But in assessing promise fulfillment, we considered where matters of our national security are at stake. During President Obama's first term in office, China continued to put our military men and women at risk by delivering counterfeit parts for such critical military warfighting systems as the F-15 fighter, Maverick missile, V-22 Osprey tilt-rotor aircraft and some of the U.S. Navy's submarines. While the extent of counterfeiting cannot be quantified exactly, the Government Accountability Office (GAO) has acknowledged that it is taking place. The USG/DoD could do better to find alternative sources, other than China, for its critical military spare parts. Even if this means paying more for those parts, putting more U.S. citizens to work manufacturing those parts would be a positive side benefit.

While the Obama Administration took initial steps to enhance the safety of imported products, it has fallen far short of ensuring that militarily significant parts obtained from China meet the standards necessary to ensure the safety of military personnel.

This promise has only seen initial progress toward fulfillment.
The Promise: "From Tibet to cracking down on democracy and religious freedom activists, China has failed to live up to international standards of human rights. Barack Obama and Joe Biden...will press them to respect human rights."
When/Where: Obama-Biden Plan: "Protecting U.S. Interests and Advancing American Values in our Relationship with China" dated 09/11/08.
Status:The Communist Chinese government acknowledges that its form of government is a "socialist democracy" under which public debate on certain issues is permitted, so long as the Communist Party's leadership is not challenged.

However, that Party continues to disregard human rights and religious freedom well into President Obama's second term in office.

Secretary of State Clinton, during her first trip to China on 02/09, appeared to push human rights concerns to a low priority by stating that human rights issues "can't interfere with the global economic crisis, the global climate change crisis, and the security crisis."

Meanwhile, those who spoke out against the Communist Party continued to be persecuted, critical internet postings were viewed as subversive, web sites were and continue to be routinely shut down, and their authors hunted down and jailed.

The U.S.-China "Human Rights Dialogue," a forum that permits direct engagement with China on U.S. concerns over specific human rights issues, resumed in mid-CY2010. One of issues discussed was the continued incarceration of Xue Feng, a U.S. citizen, serving an 8-year sentence and $30,000 fine for allegedly revealing state secrets when he published information about China's oil fields in CY2007. Other than monthly U.S. consular official visits to Xue, State Department efforts to have him released for humanitarian reasons have been ineffective. In fact, his sentence was upheld on 02/18/11.

By hosting Chinese President Hu Jintau on 01/19/11, President Obama became the first U.S. President to host a head of state whose country continues to imprison a Nobel Peace Prize laureate, democracy advocate and writer Liu Xiaobo who has since died of liver cancer but was serving an 11-year prison term and whose wife remains under house arrest. On that date, President Hu first tried to deflect a direct question from Ben Feller of the Associated Press regarding China's poor human rights question. When pressed to answer the original question by Bloomberg's Hans Nichols, President Hu simply stated that "a lot still needs to be done in China in terms of human rights." These comments were censored from the press briefing version aired in China.

In a joint statement released on 01/19/11, the U.S. and China addressed their differences on human rights in a "spirit of equality and mutual respect." Translation: no progress. Shortly thereafter on 04/02/11, one of China's best-known and sometimes provocative contemporary artists, Ai Weiwei, was arrested while trying to board a flight to Hong Kong. His whereabouts remained unknown until 06/22/11 when he was released after signing a confession of having "committed crimes against the state."

Hundreds of activists and intellectuals have reportedly been detained or have simply disappeared in China's efforts to thwart the possibility of a popular uprising such as experienced the "Arab Spring" uprisings in Egypt, Tunisia, Bahrain, Syria, Libya and other Middle East countries during the first half of CY2011.

The 17th U.S.-China "Human Rights Dialogue" took place in 07/24-25/12. The State Department acknowledged in its press brief following this conference that "The overall human rights situation in China continues to deteriorate."

Whatever the Obama Administration has done with regard to pressing the Chinese to respect human rights, it hasn't worked.

This promise has not been effectively fulfilled.
The Promise: "...will press China to end its support for regimes in Sudan, Burma, Iran and Zimbabwe."
When/Where: Obama-Biden Plan: "Protecting U.S. Interests and Advancing American Values in our Relationship with China" dated 09/11/08.
Status:Iran: While China provided support for U.S.-led United Nations watered-down sanctions against Iran's nuclear energy program in 06/10, China remained Iran's largest oil customer and was exempted from some of these weak sanctions. However, China has been extremely vocal about its opposition to U.S. unilateral sanctions against Iran. As Japanese and Western investments have dried up in Iran, China has increased its own investments, thereby maintaining and possibly elevating its support of Iran's regime.

Burma: In 03/10, China defended the Burmese regime's controversial election laws at the UN Security Council by taking the position that any transition to democracy is an internal affair. A year later the first democratically elected President of Myanmar (Thein Sein) visited China during which China reaffirmed its "respect for Myanmar's independence, sovereignty and territorial integrity."

Zimbabwe: China continues to be Zimbabwe's largest investor, exploiting the country's natural resources to develop its own economy. This was greatly facilitated by Zinbabwe's "Look East Policy" established in CY2000 by President Mugabe. China attempted to deliver arms and ammunition to the Mugabe regime in 03/09 during an election crisis, despite Zimbabwe's international isolation due mainly to human rights abuses. On 09/11/11, Mugabe stated: "The imperialist countries of Britan, Europe and the U.S. have continued to undermine our country...we are grateful to the stance China has always taken in defending our sovereignty."

Sudan: China imports about 80% of Sudan's oil, and continues to deliver weapons, ammunition, tanks, helicopters, fighter aircraft etc. to the Sudanese regime in Khartoum. During the 01/11 visit of Chinese President Hu Jintao to the USA, China agreed to fully support Sudan's Comprehensive Peace Agreement (CPA). For China, this ensured uninterrupted acquisition of oil from the oil-rich South after the South became an independent country in 07/11, while continuing to arm the Khartoum regime. At the same time, China has continued to favor the Khartoum regime of President Omar Al-Bashir by adopting a "look the other way" non-interference policy in Darfur where, according to UN reports, more than 300K people have been killed and nearly 3M people have been displaced. During President Hu's 01/11 visit to the USA, he only acknowledged that progress should be made in the political process to resolve the Darfur issue. Meanwhile, China agreed on 07/08/13 to finance the construction of a new $700M Khartoum International Airport.

With the exception of Burma where new-found democracy came about outside of Chinese influence and where Chinese support of a repressive regime is no longer an issue, Chinese support of the regimes in Iran, Zinbabwe and Sudan as of end-CY2013 is either at the same level or at a higher level than when President Obama assumed the presidency in CY2009.

This promise has not been fulfilled.
The Promise: "...will vigorously enforce our trade laws and trade agreements to ensure that American companies have a fair opportunity to compete and to counteract piracy of intellectual property."
When/Where: Obama-Biden Plan: "Protecting U.S. Interests and Advancing American Values in our Relationship with China" dated 09/11/08.
Status:U.S. manufacturers have validated their claims that China routinely counterfeits U.S. goods, offering these goods on the U.S. and world markets at cut-rate prices, thereby furthering China's goals to hold the USA at a competitive export disadvantage and feeding the estimated $26B+ trade imbalance.

The U.S. position on mitigating this situation is weak at best. Legislation to strengthen enforcement capabilities is not forthcoming. Other areas of U.S.-China disputes that have not meaningfully been addressed by the Obama Administration include:

1. Raw Materials: Aside from China's politically sensitive export restrictions on 17 minerals known as "rare earths," China is imposing export restrictions on 9 industrial raw materials such as zinc and coke. Export quotas for rare earths were capped by China at 30.1 metric tons in CY2011 and 31.1 metric tons for CY2012.

2. Steel: China has imposed duties on grain-oriented, flat-rolled electrical steel from the USA. This steel is used by the power generating industry in transformers and reactors. Duties on specific steel imports were imposed in 04/09, under the claim that the USA was "dumping" its "subsidized" steel in China.

3. Credit Cards: The USA claims that China is restricting U.S. companies such as Visa from joining China's credit card payment system in favor of its domestic payment system, UnionPay.

4. Alternative Energy: China's wind power manufacturing requires companies in receipt of any type of government aid to use Chinese parts. The U.S. claims that this requirement creates a trade barrier and constitues a subsidy in contravention of Geneva-based World Trade Organization (WTO) rules.

5. Tires: The United Steelworkers union petitioned President Obama in 09/09 to introduce 3-year duties on $1.8B worth of Chinese car and light truck tires. China's response has been that the tariffs are "a serious case of trade protectionism, which China resolutely opposes." Nonetheless, on 09/05/11 the WTO approved the Obama Administration's request to impose safeguard tariffs on tires imported from China.

6. Intellectual Property: An estimated $3.5B-$8B is lost annually from the American economy due to Chinese piracy of music, movies and software alone, according to the International Intellectual Property Alliance. During a 05/11 U.S.-China strategic and economic dialogue, China stated that they would stop the theft of intellectual property from the U.S. as pertains to software used on Chinese Government computers. Non-government software, music, movies etc. will apparently continue to be subject to piracy by the Chinese.

While progress was made in applying high tariffs on Chinese tire imports, much needs to be done on the other aspects of this promise. President Obama realized this and took advantage of the 11/12-13/11 Asia-Pacific Economic Cooperation (APEC) conference in Hawaii to again make the point to his Chinese counterpart that "enough is enough" with China's blatant violation of U.S. intellectual property rights. There was no official Chinese reaction, leading one to believe that violations will continue to be business as usual.

On the legislative side, bills such as the "Strengthening America's Trade Laws Act" (S. 1267) introduced by Senator John Rockefeller (D-WV) on 06/23/11 or the "Protecting American Trade Secrets and Innovation Act of 2012" (S. 3389) introduced by Senator Herbert Kohl (D-WI) on 07/17/12 did not progress beyond initial committee reviews and expired with the 112th Congress at the end of CY2012.

On 09/17/12, President Obama filed a complaint with the WTO on China's unfair subsidy of its auto and auto parts exports in contravention of China's agreement not to do so when its joined the WTO in CY2001. Simply filing a complaint with the WTO will not mitigate this situation in the near term. In retaliation, China filed its own complaint with the WTO against the USA for applying what it considers as onerous "countervailing" tariffs on goods it exports to the USA.

This promise to "ensure that American companies have a fair opportunity to compete and particularly to counteract piracy of intellectual property" by China has not been fulfilled as of early-CY2013.