A New Beginning: American Foreign Policy Under a New Administration

IMGXYZ1034IMGZYXThe incoming Obama administration faces a variety of challenges and opportunities in China and Asia more broadly. Many in Asia have assessed Barack Obama's presidential victory as a mandate for a more thoughtful, engaging American foreign policy. Opportunities for engagement include coordination to minimize the global recession, warming PRC-Taiwan relations, Chinese military modernization, and the conflicts in Afghanistan and Pakistan. 

To discuss the way forward for America's new leadership, Carnegie's Jessica T. Mathews, Douglas Paal, Michael Swaine, and Tianjian Shi, and Carnegie trustees Ambassador Stapleton Roy, Robert Legvold, and Robert Carswell, were joined by Chinese political scientists, military insiders, and government figures for a free-ranging discussion on East-West relations.

Global Financial Crisis
Mathews opened the discussion by voicing optimism for the future of American foreign policy.  She cited the significant political capital that Obama gained through his decisive victory and the willingness to work with him that world leaders have expressed as evidence that Obama can and will tackle the tough international issues from the start of his presidency.  

Foremost among the issues that she listed was the current financial crisis and its long-term implications for American leadership and American initiatives abroad. Carswell argued that the unique challenge of this crisis is the problems arising from increasingly integrated markets.  While control of a regulatory system and a surplus of capital were sufficient to manage a financial crisis in the past, integrated markets mean a crisis is not confined domestically. This points to an obvious international regulatory gap, which President Hu Jintao and President-Elect Obama discussed in a phone conversation on November eighth. The crisis has exposed the need for an international regulatory system that can move quickly with deep enough reserves to effectively meet future challenges.  

It will be difficult for a lame duck Bush administration take effective measures to ameliorate the crisis. Progress will depend on how the outgoing and incoming administrations cooperate. Carswell predicted that the transition will go smoothly, but it is less clear how the transition will play out internationally. 

Li Wei from the Ministry of Commerce voiced his concern over trade protectionism. While the campaigns were thankfully free of China-bashing, Obama did raise the point of currency manipulation before the general election. As experience has proven, a new president, especially under difficult circumstances, will target a specific country in order to deflect criticism. China is an easy target because of its large trade surplus. Li Wei emphasized how integrated the two economies have become, pointing out that 40% of the American consumer market is occupied by Chinese goods. The general feeling among many on the panel was that this was no time for political posturing, as it could damage vital mechanisms for cooperation.

During the general discussion, Douglas Paal responded to Li Wei’s comments. According to Paal, concern over protectionism is misplaced; leaders in the U.S. have learned from the history of the Great Depression that closing borders to trade would be a misstep. As for direct investment from China, the current atmosphere is worth testing, particularly investment in financial institutions in New York.

East Asian Security
IMGXYZ1035IMGZYXThe Taiwan issue was a point of particular concern for a number of panelists. On the eve of both a historic advance for Taiwan-Mainland relations, as well as a $6.4 billion arms sales announcement from the Bush administration, the Obama administration's approach to cross straits relations was a topic of high speculation. Major General Luo Yuan expressed the hope of the Chinese people and army that the U.S. will not “inflame” the situation with arms sales. General Zhu Chenghu added that actions of this sort have been perceived by the Chinese—and will likely be perceived similarly in the future—as aimed at containing China’s development. However, General Zhu does not predict any looming problems on the horizon in this regard. According to him, the U.S. and China are converging on this issue: the U.S. is pursuing the status quo and China has turned to peaceful unification.

Michael Swaine rejected the possibility that the U.S. will pursue actions to counter improvements in Taiwan-Mainland relations. The Obama administration will want increased stability, cooperation, and harmony so long as it does not involve coercion. It is likely that the Obama administration will follow President Ma’s lead in this regard.  

Swaine and Douglas Paal also addressed broader Asia security issues. Swaine predicted enhanced U.S. military posturing in the Pacific as a way to address China’s growing military capabilities. Swaine foresaw increased military-to-military exercises, which Defense Secretary Rumsfeld avoided under the Bush administration.

Regarding South Korea, Paal cited U.S. desire to reopen the U.S.-Korean free trade agreement talks as a probable source of tension with China. He also mentioned Burma as a area for U.S.-Sino cooperation. Both predicted increased engagement, less ideology, and higher expectations in Sino-U.S. relations under the Obama administration.

North Korea is also a point of common interest. China has been instrumental during the six-party talks. Kim Jong-Il’s recent public emergence has been seen by leaders like Ding Kuisong as a subtle sign that the North Korean regime wants to engage the U.S. Roy and Xue agreed that North Korea wants to keep the momentum going on talks as well as put U.S. commitments of compensation and normalization on the table. It is unclear, however, whether U.S. domestic politics will permit normalization. As a result North Korea will probably retain weapons as bargaining chips. Roy identified hardening stances by both Japan and South Korea as evidence of internal divisions within the group. This will make U.S.-China cooperation even more crucial moving forward.

U.S.-Russian Relations
The majority of panel members identified Russia as one of the most critical relationships that the Obama administration needs to address. Robert Legvold, a Russian affairs expert, described the mutual distrust and suspicion that characterizes the current U.S.-Russia relationship as the worst it has been since the early Reagan years. Legvold traced the relationship’s “path to deterioration” from its high point at the Moscow Summit in 2002 to the lead up to the Iraq War. The key point in this timeline was Vladimir Putin’s 2006 speech in Munich; a strident attack on the fundamental thrust of U.S. foreign policy. More recently, Dmitry Medvedev and Putin have blamed the U.S. for the Georgian crisis and the financial crisis.  

Levgold also described himself as “guardedly optimistic” that the Obama administration would be capable of improving tense relations, primarily because Obama has voiced a commitment to multilateralism. If that holds true, Russia will not be able to criticize the U.S. as stridently or maneuver with European allies to undercut U.S. foreign policy. 

Ambassador Stapleton Roy noted that improved U.S.-Russia relations could help Obama's relationship with the Chinese. Because the Bush administration created an atmosphere in which Russia was driven to China in order to counterbalance U.S. hegemony, thawed U.S.-Russian relations could create more space between the Sino-Russian relationship. Ideally, a “normal” triangular relationship will develop with all three powers cooperating and competing, but not in ways that have two containing the third.

Iran and Pakistan-Afghan Stability
IMGXYZ1036IMGZYXDr. Mathews identified Iran, Afghanistan and Pakistan as important challenges for the Obama administration.  She also connected the problems in Afghanistan as inextricably bound to the political stability of Pakistan. The U.S. currently has no viable plan for Pakistan. Dr. Paal characterized this foreign policy challenge as a difficult one between the U.S. and China and suggested a multilateral approach to “de-conflict” joint operations. 

Iran will also need Russian and Chinese cooperation. As Swaine explained, Obama's transition from Iraq to Iran will require both Russia and China. How well the countries cooperate will be a measure of how well the relationship between the powers are operating.

Levgold called it a mistake to believe that an improved relationship between the U.S. and Russia will alleviate the situation in Iran. Only if Russia can be convinced that sanctions in Iran are convergent with its own agenda will it offer its aid. Similarly, many on the panel expressed the need for the U.S. to approach China on equal footing.

Xue Fukang pointed out that while it would be “naïve” for anyone to believe that the days of U.S. primacy are over, the sense among panelists was that it would be equally naïve to assume an increasingly capable China will follow the U.S.foreign-policy lead when it has its own foreign policy interests to meet.   

General Motors in China
GM China Group President and Managing Director, Mr. Kevin E. Wale, provided insight on how GM does business in China during his keynote presentation. While Wale spoke strictly from a business standpoint, the theme of cooperation in his presentation echoed the advice panelists had for the Obama administration during the conference. Success in China has meant being part of the community. GM actively contributes to a positive relationship between governments by cutting through rhetoric so policymakers understand the importance of stable relations. GM has cultivated a grassroots level understanding of the culture, which has led to an understanding of the people and ultimately the market. It developed strong personal relationships in China and works hard to reduce unhelpful stereotypes about working in China. Lastly, GM has integrated its development with the development of local capabilities. Thus there is an exchange of knowledge and a strong cooperative relationship.