25th January 2012

Bridges Weekly | Obama Takes Aim at China Trade Practices, Pushes for Clean Energy


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Beijing’s trade policies once again came under fire in Washington on Tuesday evening, as US President Barack Obama pledged in his annual State of the Union address to “do more” to ensure a level playing field for US products. With the November presidential election in his sights, clean energy is also set to be high on the White House agenda, with Obama asking Congress to “double-down on a clean energy industry that’s never been more promising.”

“We need to do more” on China, Obama says

The US President, addressing a joint session of Congress in his speech on Tuesday 24 January, promised to “go anywhere in the world to open markets for American products,” adding that he would be sure to hold the US’ trading partners to international trade laws.

“I will not stand by when our competitors don’t play by the rules,” Obama said.

The US and China have seen trade tensions escalate over the past year, with Washington and Beijing engaging in a tit-for-tat row that has covered a broad range of issues, from China’s valuation of its currency, to antidumping claims at the WTO, to both countries’ support of their respective renewable energy sectors.

“Over a thousand Americans are working today because we stopped a surge in Chinese tyres,” Obama said, referring to a WTO dispute in which China had unsuccessfully challenged safeguard measures levelled by Washington on Chinese tyre imports (see Bridges Weekly, 7 September 2011).

“But we need to do more. It’s not right when another country lets our movies, music, and software be pirated. It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidised,” he added.

In his address, Obama confirmed earlier reports that he would be establishing a Trade Enforcement Unit that would be tasked with investigating “unfair trade practices in countries like China,” along with promising more border inspections to prevent imports of counterfeit or unsafe goods (see Bridges Weekly, 11 January 2012)

Russia also on the agenda

The US President also appeared to make a subtle call for Congress to move forward on restoring permanent normal trade relations with Moscow, stressing that “this Congress should make sure that no foreign company has an advantage over American manufacturing when it comes to accessing finance or new markets like Russia.”

Russia’s 18-year bid for WTO membership was approved at the WTO’s Eighth Ministerial Conference in December, with its full membership set to come into effect later this year once the Russian parliament ratifies its accession package (see Bridges Daily Update, 18 December 2011).

However, the US still lacks permanent normal trade relations with Russia, as the result of a Cold War-era provision that allows Washington to deny most-favoured nation (MFN) status to nations with limited freedom of emigration.

The legislation - known as the Jackson-Vanik amendment - would need to be repealed by the US Congress in order for permanent normal trade relations to be restored. Obama has stressed in recent months that taking Jackson-Vanik off the books in 2012 is a White House priority.

Just last week, Russian Foreign Minister Sergei Lavrov told a news conference that the US must repeal the law, or else Russia would “not abide by the commitments it undertook as a WTO member if the Jackson-Vanik amendment remains in force.”

White House promises to develop “every available source” of energy

In his speech, Obama also made a pitch for developing an energy strategy that would open more than 75 percent of the US’ potential offshore oil and gas resources, while also developing natural gas and increasing Washington’s backing of renewable energy.

“The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy,” the US President promised.

Obama also urged Congress that it was time to “double-down” on the clean energy industry. “I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here.”

While the US recently retook the top position in investment in clean energy - surpassing China - US solar panel producers have struggled to keep up against cheap solar imports from China and sharp decreases in the price of solar panels (see Bridges Trade BioRes, 23 January 2012 and Bridges Weekly, 16 January 2012).

The buzz around finding new sources for the US’ energy needs reached new heights over the past week, after Obama’s 18 January announcement rejecting a plan for the building of a multi-billion dollar pipeline that would have carried crude oil from Canada to the US state of Texas, faulting Republicans for having imposed an “arbitrary” deadline for the project’s approval (see Bridges Weekly, 18 January 2012).

However, in last week’s announcement, Obama made clear that the decision was “not a judgement on the merits of the pipeline,” potentially leaving the door open for the project to move forward at a later date.

The proposed pipeline had been the subject of weeks of debate on its environmental and economic implications. Opponents had called the Keystone project environmentally irresponsible, citing concerns over the proposed pipeline’s carbon footprint, among others. Meanwhile, supporters - which include many Republicans - had argued that the project was key to creating US jobs and increasing the US’ energy resources.

US “on track” to double exports

In his speech, the US President also highlighted progress toward the goal he set at the 2010 State of the Union address, in which he promised to double US exports within five years - from US$1.57 trillion in 2009 to US$3.14 trillion by 2015 - in an effort to create new jobs.

“Two years ago, I set a goal of doubling US exports over five years. With the bipartisan trade agreements I signed into law, we are on track to meet that goal - ahead of schedule,” Obama said, referring to the US’ free trade agreements with Colombia, Panama, and South Korea.

The three trade pacts had been the subject of prolonged political debate between parties for years, having been signed into law by former US President George W. Bush in 2007.

The FTAs were ratified by the US Congress and signed into law this past autumn (see Bridges Weekly, 12 October 2011).

Republican presidential candidates respond

The State of the Union address drew harsh rebukes from Republican presidential candidates, who hit back at Obama’s economic and energy policies in their responses.

With the US presidential election scheduled for the first Tuesday in November, Republican candidates have spent the past several months jockeying for position in the contests for their party’s nomination. Last Friday’s primary in the US state of South Carolina saw former House Speaker Newt Gingrich beat out former Massachusetts Governor Mitt Romney - until then widely seen as the party’s frontrunner - by a wide margin in the polls, refocusing much of the national attention on the escalating rivalry between the two candidates.

“I will open up new markets for American goods, and open up our lands so that we can finally develop our energy resources,” former Massachusetts Governor Mitt Romney promised in his pre-rebuttal remarks.

“My administration will support the development of these resources, not find excuses to stand in the way,” the former governor added, pledging both to take advantage of a “revolution in drilling for natural gas” and to approve the Keystone oil pipeline should he win office.

Gingrich, in his response to Obama’s address, also took aim at the White House decision to reject TransCanada Corporation’s proposed pipeline.

“Only recently the president cancelled the Keystone XL Pipeline that would have created countless new jobs and helped America on the way to energy independence because he wanted to appease the far left of his party,” the former House speaker said. “And yet not a single word on the Keystone XL pipeline tonight.”

The four-man race for the Republican Party nomination next moves to the US state of Florida, with a primary scheduled for Tuesday 31 January.

ICTSD reporting; “Russia threatens to ignore WTO commitments in trade with US if Cold War law isn’t scrapped,” ASSOCIATED PRESS, 18 January 2012.

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