Analysts’ Views: What U.S. vote means for G20 summit

(BestGrowthStock) – U.S. voter anxiety about the economy and discontent with President Barack Obama’s leadership fueled big Republican gains in mid-term elections on Tuesday.

That raises questions of what the outcome means for next week’s G20 summit in Seoul that will tackle global economic imbalances and currency tensions.

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* SUN ZHE, PROFESSOR OF INTERNATIONAL RELATIONS AT TSINGHUA UNIVERSITY IN BEIJING

“The main implication for the U.S. will be that Obama will face deadlock, and the most likely model he will follow will be Clinton after 1996, becoming more flexible. For China-U.S. relations, the tone in Congress was already quite harsh, while the administration officials, such as Jeffrey Bader, have been more willing to stress cooperation. I don’t think that this basic pattern will be upset, but the Congress may become more troublesome for China on some issues.

“Many of the election races featured China, and that’s because so many people are worried about the economy. That’s not going to change much, and so I believe that China will continue to be treated as the bad guy in many issues.” He cited growing friction over new energy policies and Chinese subsidies, and Chinese government procurement policies.

On the yuan exchange rate issue, Sun said the Republicans shared Democrat complaints that the yuan is seriously undervalued, but would probably lean away from unilateral initiatives and legislation to address the issue.

“I don’t think the new Congress will be all that different. The approach of (Charles) Schumer and so on has been more direct and confrontational. But the Republicans will lean more toward a multilateral approach, drawing in Latin America, other Asian countries and so on to apply collective pressure on China. The two parties both agree that the renminbi is seriously undervalued, but they have a different approach in how to deal with it. In any case, Obama is also pursuing a multilateral approach, at the G20, and that will continue.”

TAO XIE, EXPERT ON U.S. POLITICS AT BEIJING FOREIGN STUDIES UNIVERSITY, WHO ADVISES THE CHINESE GOVERNMENT

“This will likely get nasty in terms of polarization and we could see another showdown like in 1995 and ’97 between Clinton and the Republicans over the budget.

“The good news is that with a Republican majority in the House, the United States at the federal level will push more forcefully for free trade agreements, including in Asia.

“The Republicans have been stronger supporters of free trade. Obama has been very attached to the trade unions and that’s why he’s been so slow. But while the Republicans have historically been pro-trade, they have also been hawkish on defense.

“…I always trust the Republicans on free trade, but they may also sponsor pro-Taiwan legislation and push more on human rights issues.

“On the yuan front, the Republicans will probably lower the heat. They are aware that demands for appreciation have to be balanced against calls for greater market access in China.”

* WIMAR WITOELAR, VETERAN INDONESIAN POLITICAL ANALYST

“Yes, Obama is weakened at home, and is weakened in the world now. The U.S.’s desire to assert its position in financial markets is now compromised. People will not be listening to Obama’s position, instead working behind his back and looking to what the Republicans are doing. He is no longer a strong partner to have.

“The Indonesian government is similarly weakened for being pro-American. In the past they could deflect criticism for saying yes because America was the right side to be on, but now the U.S. is seen as grouped with the losers.

“Indonesia’s concern is with the utility of the U.S. on common issues between the two countries. Obama cannot now lend moral strength to Indonesian issues such as corruption and human rights.

“Our government seeks independence regionally, and has relied on the West to maintain that independence. China will surely capitalize on U.S. weakness in Indonesia; it would not be a strong country if it did not. China is huge, with lots of money and capability to achieve what it wants. Obama as well as Indonesia will seek to play a defensive game in the G20, with the aim to get as much dignity out of it as possible.”

ANTON GUNAWAN, ECONOMIST AND ANALYST AT BANK DANAMON, JAKARTA

“Domestic policy may be difficult for him (President Barack Obama) to implement from now, including all the policy switches related to the G20 topics like the currency war, the pressure on China, protectionism and so on. Obama will try to continue pressuring in the G20 forum for a solution to the currency imbalances, especially because according to the U.S., the currency inflexibility is the main source of the problem. I don’t think that’s necessarily the case but he will try to push in that direction.

“Probably this is a chance for him to prove himself. He may want to make it look like he wants to speed up the process and push harder. But the ball park is different. China will be stubbornly keeping its position.”

KWON SOON-WOO, HEAD OF MACRO-ECONOMICS, SAMSUNG ECONOMIC RESEARCH INSTITUTE IN SEOUL

“The Obama administration may lose the momentum in pushing ahead with the proposed reform in the U.S. financial industry and this may give emerging-market economies within the G20 an excuse to become less cooperative in accepting aggressive reform measures. On the foreign exchange issue, both the Republicans and Democrats have recently showed little difference in their approach and so I wouldn’t expect much difference in the way the U.S. deals with the issue. But again, the weakening momentum in general on the part of the Obama administration could still have an effect.”

MICHAEL FULLILOVE, PROGRAMME DIRECTOR, GLOBAL ISSUES, LOWY INSTITUTE FOR INTERNATIONAL POLICY, SYDNEY

“If the trend continues and Democrats suffer big mid-term losses it would weaken Obama domestically, but may prompt him to take a tougher stance on the international stage at the Seoul summit in order to assure Americans that he has a strong focus on the ailing U.S. economy.

“If the president’s party suffers a big defeat in the mid-terms, then that robs him of momentum. National capitals are like calculating machines, constantly calculating the political strengths of leaders that they deal with. Obviously, the biggest factor working against Obama is the economy — it’s the 9.6 percent unemployment, the high deficit, the anemic economic growth. That to some extent puts him in a weaker position. But it depends on how Obama reacts. There are two ways he could react to this. One is to retreat into foreign policy, which presidents sometimes do. The other is to fight back on the economy. And in that case you might actually see him putting more weight on this (the Seoul summit). He may be desperate to get a win. To reassure Americans that he has a strong focus on the economy.”

LIN CHONG-PIN, PROFESSOR OF STRATEGIC STUDIES, TAMKANG UNIVERSITY, TAIPEI

“Washington’s Asia policy, which includes China, has been turning. The Obama administration has learned it needs to be more flexible. The Republicans are supported by businesses, and they usually cave first to China, so in the long run I don’t see much difference, just some words and gestures in the short term. I think Hillary Clinton is very good. She can talk to leaders on Capitol Hill about some kind of compromise.”

* AMITABH MATTOO, PROFESSOR OF INTERNATIONAL POLITICS AT JAHAWARLAL NEHRU UNIVERSITY, MEMBER OF COUNCIL OF THE INDIAN COUNCIL FOR WORLD AFFAIRS

“Obama is going to be too preoccupied domestically, and you won’t see a more aggressive foreign policy going forward. On his upcoming trip (to India), I think that the best India can hope for is a consolidation of the relationship established under President Bush.

“The focus is going to shift to Afghanistan and Pakistan, and the manner in which the U.S. can exit Afghanistan. It will be extremely difficult now to arrive at a bipartisan agreement on Afghanistan-Pakistan in Washington, and I think we will see a period of intense confusion on that front.”

Analysts’ Views: What U.S. vote means for G20 summit