“Play by the rules,” Obama to China
“ ‘For an economy like the United States -- where our biggest competitive advantage is our knowledge, our innovation, our patents, our copyrights -- for us not to get the kind of protection we need in a large marketplace like China is not acceptable,’ Obama said.”
For China there are costs to “playing by the rules.”
1) The cost of instituting comparable laws and regulations
2) The cost of enforcement
3) The cost of litigating disputes
4) The cultural cost to change
5) The loss of economic advantage from not playing by the rules
So, if they don’t play by the rules, what options does America have?
Here is one: Discount the amount owed to China on loans by a proportionate amount of cost from their not playing by the rules. Simply put, short our payments to them.
“Obama warns Hu of U.S. frustrations on trade
HONOLULU | Sun Nov 13, 2011 3:38am EST
(Reuters) - U.S. President Barack Obama sought to ratchet up pressure on China over its currency and trade policies, warning Chinese President Hu Jintao on Saturday that Americans were growing "impatient and frustrated" over economic relations.
Obama, under pressure to create jobs at home and trying to highlight U.S. influence abroad, adopted a more steely tone with Hu than he has at other recent meetings with his Chinese counterpart.
At a forum of business leaders that began his first day at the Asia-Pacific Economic Cooperation (APEC) summit, Obama said China must play by international rules when it comes to trade and must stop poaching U.S. intellectual property.
"What I have said since I first came into office and what we've exhibited in terms of our interactions with the Chinese is we want you to play by the rules. And currency is probably a good example," Obama said, referring to long-standing U.S. requests for China to let the yuan float freely.
"For an economy like the United States -- where our biggest competitive advantage is our knowledge, our innovation, our patents, our copyrights -- for us not to get the kind of protection we need in a large marketplace like China is not acceptable," Obama said.
U.S. officials said private talks Obama and Hu held later focused heavily on economic issues and that the U.S. president conveyed growing American concerns about the trade relationship.
"He made it very clear that the American people and the American business community were growing increasingly impatient and frustrated with the state of change in China economic policy and the evolution of the U.S.-China economic relationship," senior White House aide Michael Froman told reporters.
White House spokesman Jay Carney said Obama was "very direct" with Hu on the trade issues.
It was unclear what effect Obama's complaints, which seemed aimed in part at a domestic U.S. audience, would have on China. Beijing holds leverage of its own as the United States' largest foreign creditor, holding more than $1.1 trillion in U.S. debt.
China argues that it has already allowed the yuan to rise significantly, and has complained it has not been given adequate access to invest in U.S. industries.
Hu stressed cooperation rather than confrontation.
Seated side-by-side with the U.S. president before their closed-door meeting, Hu -- alluding to the European debt crisis -- said that in turbulent times it was all the more important that the United States and China "increase their communication and coordination" on economic matters.
"A LITTLE BIT LAZY"
Obama is under pressure from Republican presidential candidates, including front-runner Mitt Romney, as well as some of his fellow Democrats to take a tougher line with China.
Yet in remarks that could cause political ripples back in Washington, Obama also took his own country to task, saying it needed to do more to encourage foreign investors to seek opportunities in the United States.
In a question-and-answer session at the business forum moderated by Boeing Co chief executive James McNerney, Obama said the United States is attractive to businesses because of its open economy, innovativeness and stability.
"But we've been a little bit lazy, I think, over the last couple of decades. We've kind of taken for granted -- well, people will want to come here and we aren't out there hungry, selling America and trying to attract new business into America," Obama said.
Before his meeting with Hu, Obama said he planned to discuss "how we can continue to rebalance growth around the world" and the goal of creating jobs and making sure their two countries end up in a "win-win" situation on the economy.
As part of a "rebalancing", U.S. officials would like China to let its currency rise, which would help make its exports more expensive and allow Chinese citizens to buy more imported goods. They argue this will help China shift away from an over-reliance on exports toward more domestic demand.
"Although there are areas where we continue to have differences, I am confident that the U.S.-China relationship will continue to grow in a constructive way based on mutual respect and mutual interest," Obama said.
Obama called for "reciprocity" in the trade arena, saying there was no reason this should lead to problems in broader relations. But he said the United States would "speak out and in some cases we'll take action" if rules were being broken.
Obama told business leaders the United States was putting a priority on the fast-growing Asia-Pacific region.
He also offered guardedly optimistic predictions that Europe would work its way through its fiscal problems.
There have been positive signs in Europe's efforts to tackle its debt crisis, with leaders focused not just on Greece but on problems affecting the euro zone more broadly, he said.