The Electoral Math of Romney’s Stance on Trade With China
By JOHN HARWOOD
Published: March 22, 2012
WASHINGTON — Among all the elements of Mitt Romney’s 59-point economic plan, his vow to crack down on China’s trade policy would seem the most out of place.
That is not because his promise to label China a “currency manipulator” and impose tariff penalties is unique. Plenty of politicians in both parties talk tough about Beijing.
What is unusual is that Mr. Romney, a former financial executive identified with Republicans’ free-trade, pro-business wing, has promised to go further than Presidents Obama or George W. Bush in confronting China. Some other business-friendly Republicans warn that his approach could set off a counterproductive trade war that would damage the United States economy.
The political question is whether Mr. Romney’s stance can attract enough votes to give him the chance to put it into effect. That question echoes through Republican primaries, in which he has struggled to connect with working-class conservatives, and a possible general election against Mr. Obama.
Republican and Democratic strategists alike say that confronting China can play effectively to an anxious public’s sense of economic grievance. The Obama administration has recently lodged a complaint with the World Trade Organization against China’s handling of crucial rare earth mineral exports, and imposed tariffs on Chinese solar panels to counter what it considers unfair subsidies by Beijing.
“With blue-collar voters specifically, there’s a perception that we have an economic adversary in China that doesn’t play by the rules,” said Geoff Garin, a Democratic pollster. And the concern “cuts across socioeconomic lines,” said Tony Fabrizio, a Republican pollster, who said higher-income voters fear that China’s ownership of United States government debt threatens American security.
Yet prominent figures who generally share Mr. Romney’s economic outlook have criticized his stance, which the Wall Street Journal editorial page called “Romney’s China Blunder.” Business leaders, while pressing for China to open its markets and protect intellectual property, caution that labeling China a currency manipulator could backfire, harming those efforts.
Jon M. Huntsman Jr., who was ambassador to China before embarking on his failed bid for the Republican presidential nomination, accused Mr. Romney of “total pandering” on the issue before exiting the race and endorsing him. Rick Santorum, now competing with Mr. Romney for blue-collar votes, has taken a similar view.
“We all know Mitt Romney will do and say anything to get votes,” said Hogan Gidley, Mr. Santorum’s communications director.
Mr. Obama’s advisers called Mr. Romney’s stance hypocritical. A Romney family blind trust owns a stake in an investment fund established by his former company, Bain Capital, that has bought a Chinese video surveillance company. And in his 2010 book, “No Apology,” Mr. Romney criticized Mr. Obama for levying a trade complaint against Chinese tire exports. Accusing Mr. Obama of acting to reward union supporters, he wrote, “Protectionism stifles productivity.”
Mr. Romney’s China currency stance “is about as authentic as his brief flirtation with cheesy grits,” said David Axelrod, Mr. Obama’s top political strategist. “When you build a career around outsourcing, slashing jobs and wages, and profiting handsomely off of bankrupting companies, I don’t think people are going to be moved by what is an obvious election-year conversion.”
One Romney adviser, Vin Weber, initially wondered whether the position reflected political calculation. When he joined internal discussions about Mr. Romney’s forthcoming economic plan last year, Mr. Weber said he sought to persuade other economic advisers to abandon the promised currency crackdown, which he still considers a policy mistake. Soon Mr. Weber was making that case directly to the candidate — who rejected the appeal and insisted his policy is the right one.
“This is directly from him,” said Mr. Weber, a Washington lobbyist and former Republican congressman from Minnesota. “He believes it will strengthen his hand substantially. Mitt Romney is a person who sees himself as a successful negotiator.”
Underpinning Mr. Romney’s argument is his assertion that recent presidents of both parties have been “played like a fiddle” by Chinese leaders. By keeping the yuan’s value lower against the dollar than market forces would dictate, Beijing makes exports to the United States cheaper and imports from the United States more expensive. In a Republican debate last year, Mr. Romney said China’s interest in smooth relations with a mammoth customer like the United States would preclude his actions from backfiring.
“You think they want to have a trade war?” Mr. Romney said. “If you are not willing to stand up to China, you will get run over by China, and that’s what’s happened for 20 years.”
That assertion grates on veterans of the Bush administration, which in 2006 began a “strategic economic dialogue” with China led by Treasury Secretary Henry M. Paulson Jr., a former chairman of Goldman Sachs. The Obama administration has extended that dialogue, pressing Beijing to raise the value of the yuan while stopping short of declaring China a currency manipulator.
“Both the Bush and Obama administrations have been as aggressive as possible while protecting the American people,” said Neel T. Kashkari, a Bush administration Treasury official now at Pimco, the giant bond-trading firm. “Launching a trade war with China would hurt us as much as it would hurt them.”
Mr. Romney’s economic plan makes it sounds as if he is willing to take that risk. It lists the currency crackdown among five executive orders he pledges to issue on “Day 1” of his presidency.
But a close reading of the language suggests he has left himself an out. It pledges to label China a currency manipulator “if China does not quickly move to float its currency.”
China has already been raising the value of its currency against the dollar somewhat in recent years, including by 4.7 percent in 2011. Some experts on China policy predict a President Romney would find a way to sidestep his pledge once electioneering gave way to governance.
“It is a campaign, after all,” said Nicholas R. Lardy, a fellow at the Peterson Institute for International Economics. “My forecast is that if Romney becomes president there will be little or no change in our China policy.”