Strikeout in Seoul
Barack Obama has only his own mercantilist rhetoric to blame for the failure of his trip to Asia
The moment was ripe with promise. China, after years of careful diplomacy and a burnishing of its image as a gentle giant, had spent the past year bullying its neighbors in territorial disputes and rattling its saber over territorial waters. Pakistan had proved itself an incapable ally in the war on terror, and a re-alignment in Central Asia was needed. North Korea had grown erratic, and a conference with regional allies was needed to determine what should be done. This was a moment of great potential, an opportunity for the U.S. to position itself as a power broker and balancer in the Pacific, to court India as a hedge against Chinese power and promoter of stability in the region, to draw contingency plans with South Korea, and to create the institutions and ties that would solidify a lasting American influence.
Unfortunately, it was a moment wasted. Instead of placing geopolitical concerns at the top of his agenda, Obama repeatedly told the world that his purpose for touring Asia was to create American jobs by foisting exports on the countries he visited. In New Delhi, Obama was greeted courteously, but he was hardly embraced the way George Bush was. And who could blame the Indians? Instead of emphasizing the natural bond that India and America share as democracies and delving into discussions on the U.S. and India’s complex relationships with China, Pakistan, and Afghanistan, Obama made it clear that he was there to shill military equipment for Lockheed Martin and Boeing.
In South Korea, things were even worse: Instead of quickly completing the slam dunk free trade agreement with South Korea that Bush had already negotiated, and moving on to more important matters, (like North Korea and China), Obama demanded fresh trade concessions, spent his entire time haggling and came away with nothing, not even the original agreement.
But the worst of all came at the Group of Twenty summit of the top economies. After incessantly priming his audience to think that American policy was directed at stealing their jobs, Obama was shocked to find that his audience believed him. As the federal reserve initiated a $600 billion round of quantitative easing, the G-20 was in a frame of mind not to see it for what it was — an attempt at monetary stimulus in light of the decreased chances for fiscal stimulus following GOP gains in the midterm elections — but instead a sort of currency war aimed at doing exactly what Obama claimed was his purpose all along: to push unemployment out of his country and into Asia. By pronouncing his ludicrous intentions, Obama invited the world to ask the questions that George Bush had artfully managed to avoid, such as, “Should we replace the dollar as the international reserve currency?”
The grim irony of the failed trip isn’t that Obama’s mercantilist rhetoric was utterly self-defeating, it’s that the world view underlying it is bunk. Countries with trade surpluses are not “winning,” and countries with trade deficits are not “losing.” The benefits of free trade are not measured just in the sales of exports abroad, but in lower prices at home. In the long run, trade has virtually no impact on the unemployment rate in the United States, and in the short run its effect is vanishingly small. Imports account for about 10 percent of the U.S. economy, and roughly a third of that is merely companies moving goods through their logistics networks, not sales to end users. The U.S. is a large country — it does not need to worry about spillovers from its injections into aggregate demand, nor should it expect much return from aggressively pushing exports.
On the eve of the trip, many left wing pundits, with an eye on the next election, hoped that President Obama could score victories in the international arena and give himself something to hang his hat on should the next two years turn into domestic deadlock. But if future forays into foreign policy go like last week’s did, it will be the Republicans, not Obama, with new foreign policy lines in their speeches come 2012.