Mercantilism: it's what's for dinner. (President Obama and President Hu Jintao of China begin their working dinner in the Old Family Dining Room. Official White House Photo by Pete Souza)

I’ll add another thing missing from that big piece on jobs and the Obama economic team – anything on China beyond a sentence or two about competitiveness and losing ground. That’s a story in itself – take a look at this story from last week on a solar panel maker moving their operations to China – but there was absolutely nothing about Chinese mercantilism or currency manipulation and how that affects trade and exports. Sadly, that’s also been largely left out of the state visit to America from Chinese Premier Hu Jintao.

Declaring that China and the United States have ‘’an enormous stake in each other’s success,’’ President Obama welcomed President Hu Jintao of China to the White House on Wednesday with an elaborate color-guard ceremony that included a colonial fife-and-drum band and a 21-gun salute […]

Mr. Obama did not entirely abandon that rhetoric Wednesday morning. After promoting the virtues of Chinese and American cooperation, the president – the 2009 winner of the Nobel Peace Prize – used the ceremony to deliver a gentle reminder to China, which is holding the 2010 winner of the prize, Liu Xiaobo, as a political prisoner.

“We also know this,” the president said. “History shows that societies are more harmonious, nations are more successful and the world is more just when the rights and responsibilities of all nations and all people are upheld, including the universal rights of every human being.”

The White House announced shortly after the ceremony that the Chinese government had agreed to buy 200 airplanes from Boeing, a $19 billion deal that is the centerpiece of $45 billion worth of American exports to China tied to President Hu’s state visit to Washington. China has also agreed to scrap a policy that favors Chinese technology firms for big government contracts, a senior administration official said.

As is customary with high-profile diplomatic visits, many of these trade deals had been cooked up for some time and saved for Mr. Hu’s arrival. They include a railway contract for General Electric, a deal by Cummins Engine to produce a hybrid bus, and a joint venture between Honeywell and Haier, a Chinese appliance maker. The official said these deals would support 235,000 jobs in 12 states.

This is basically small potatoes. I welcome seeing China pressured on human rights – the media at the press conference today did its job on that front – but the trade announcements were essentially band-aids to make it look like China is cooperating on rebalancing the trade relationship legitimately. As the executive director for the Alliance for American Manufacturing (AAM), Scott Paul, explained, “The state visit did little to change the underlying dynamic of the dysfunctional U.S.-China economic relationship. Business deals, while important, are no substitute for firm commitments from China to stop its currency manipulation and to end its illegal subsidies of industry. And they are no substitute for clearly defined consequences if China fails to make progress.” China will keep on its mercantilist course, the US will point to these tiddly-winks proposals to defend their efforts to hold China accountable, and nothing much will change. [cont’d.]

Outside the Administration, a few Democrats are at least trying to break this vicious cycle. Chuck Schumer dropped his legislation which would sanction Chinese currency manipulation the same day of Hu’s visit to Washington. And Nancy Pelosi made some strong statements today as well:

House Minority Leader Nancy Pelosi promoted the Democrats’ “Make it in America” agenda Wednesday with a warning for China: To maintain good trade relations with the United States, she said, you’d better “play by the rules.”

“‘Make it in America’ means a thriving industrial, technological, and manufacturing base in our country as the cornerstone of a growing economy,” the California Democrat said at a Washington conference of the United Auto Workers.

It also means “insisting that if China, and other nations, want a strong trading relationship with the United States, they must play by the rules,” she added.

I’ll remind that the currency manipulation bill in the House last year passed with over 350 votes, so it’s not like there isn’t massive support on both sides of the aisle to do something on this. In addition, US business leaders want trade restrictions inside China lifted, to get access to those markets. So there’s even a business component to reducing China’s mercantilism.

But without Administration buy-in, you can really just forget this. And I fear that’s where we are.

UPDATE: From the President’s final press event with Hu:

I did also stress to President Hu that there has to be a level playing field for American companies competing in China, that trade has to be fair. So I welcomed his commitment that American companies will not be discriminated against when they compete for Chinese government procurement contracts. And I appreciate his willingness to take new steps to combat the theft of intellectual property […]

I told President Hu that we welcome China’s increasing the flexibility of its currency. But I also had to say that the RMB remains undervalued, that there needs to be further adjustment in the exchange rate, and that this can be a powerful tool for China boosting domestic demand and lessening the inflationary pressures in their economy. So we’ll continue to look for the value of China’s currency to be increasingly driven by the market, which will help ensure that no nation has an undue economic advantage.

If I were confident this would go beyond just words, I’d have more than faint praise… the President did make his point more forcefully later in the presser.

I’ll add another thing missing from that big piece on jobs and the Obama economic team – anything on China beyond a sentence or two about competitiveness and losing ground. That’s a story in itself – take a look at this story from last week on a solar panel maker moving their operations to China – but there was absolutely nothing about Chinese mercantilism or currency manipulation and how that affects trade and exports. Sadly, that’s also been largely left out of the state visit to America from Chinese Premier Hu Jintao.

Declaring that China and the United States have ‘’an enormous stake in each other’s success,’’ President Obama welcomed President Hu Jintao of China to the White House on Wednesday with an elaborate color-guard ceremony that included a colonial fife-and-drum band and a 21-gun salute […]

Mr. Obama did not entirely abandon that rhetoric Wednesday morning. After promoting the virtues of Chinese and American cooperation, the president – the 2009 winner of the Nobel Peace Prize – used the ceremony to deliver a gentle reminder to China, which is holding the 2010 winner of the prize, Liu Xiaobo, as a political prisoner.

“We also know this,” the president said. “History shows that societies are more harmonious, nations are more successful and the world is more just when the rights and responsibilities of all nations and all people are upheld, including the universal rights of every human being.”

The White House announced shortly after the ceremony that the Chinese government had agreed to buy 200 airplanes from Boeing, a $19 billion deal that is the centerpiece of $45 billion worth of American exports to China tied to President Hu’s state visit to Washington. China has also agreed to scrap a policy that favors Chinese technology firms for big government contracts, a senior administration official said.

As is customary with high-profile diplomatic visits, many of these trade deals had been cooked up for some time and saved for Mr. Hu’s arrival. They include a railway contract for General Electric, a deal by Cummins Engine to produce a hybrid bus, and a joint venture between Honeywell and Haier, a Chinese appliance maker. The official said these deals would support 235,000 jobs in 12 states.

This is basically small potatoes. I welcome seeing China pressured on human rights – the media at the press conference today did its job on that front – but the trade announcements were essentially band-aids to make it look like China is cooperating on rebalancing the trade relationship legitimately. As the executive director for the Alliance for American Manufacturing (AAM), Scott Paul, explained, “The state visit did little to change the underlying dynamic of the dysfunctional U.S.-China economic relationship. Business deals, while important, are no substitute for firm commitments from China to stop its currency manipulation and to end its illegal subsidies of industry. And they are no substitute for clearly defined consequences if China fails to make progress.” China will keep on its mercantilist course, the US will point to these tiddly-winks proposals to defend their efforts to hold China accountable, and nothing much will change.

Outside the Administration, a few Democrats are at least trying to break this vicious cycle. Chuck Schumer dropped his legislation which would sanction Chinese currency manipulation the same day of Hu’s visit to Washington. And Nancy Pelosi made some strong statements today as well:

House Minority Leader Nancy Pelosi promoted the Democrats’ “Make it in America” agenda Wednesday with a warning for China: To maintain good trade relations with the United States, she said, you’d better “play by the rules.”

“‘Make it in America’ means a thriving industrial, technological, and manufacturing base in our country as the cornerstone of a growing economy,” the California Democrat said at a Washington conference of the United Auto Workers.

It also means “insisting that if China, and other nations, want a strong trading relationship with the United States, they must play by the rules,” she added.

I’ll remind that the currency manipulation bill in the House last year passed with over 350 votes, so it’s not like there isn’t massive support on both sides of the aisle to do something on this. In addition, US business leaders want trade restrictions inside China lifted, to get access to those markets. So there’s even a business component to reducing China’s mercantilism.

But without Administration buy-in, you can really just forget this. And I fear that’s where we are.

UPDATE: From the President’s final press event with Hu:

I did also stress to President Hu that there has to be a level playing field for American companies competing in China, that trade has to be fair. So I welcomed his commitment that American companies will not be discriminated against when they compete for Chinese government procurement contracts. And I appreciate his willingness to take new steps to combat the theft of intellectual property […]

I told President Hu that we welcome China’s increasing the flexibility of its currency. But I also had to say that the RMB remains undervalued, that there needs to be further adjustment in the exchange rate, and that this can be a powerful tool for China boosting domestic demand and lessening the inflationary pressures in their economy. So we’ll continue to look for the value of China’s currency to be increasingly driven by the market, which will help ensure that no nation has an undue economic advantage.

If I were confident this would go beyond just words, I’d have more than faint praise… the President did make his point more forcefully later in the presser.

David Dayen

David Dayen