Tensions Easing, Obama Talks With Chinese Leader

02/04/2010 22:47

By ANDREW JACOBS and MARK LANDLER

Published: April 2, 2010

In the call Thursday night, President Obama spoke by phone with Mr. Hu for about an hour — so long that Air Force One had to be held for 10 minutes on the tarmac at Andrews Air Force Base after landing so that Mr. Obama could finish up the conversation. Chinese television reported that Mr. Hu expressed a desire for healthier ties while stressing Beijing’s positions on Taiwan and Tibet, and the White House said Mr. Obama stressed for China press Iran on its nuclear ambitions to ensure the country “lives up to its international obligations.”

The warming trend that began earlier this week gained momentum on Thursday by the announcement that President Hu Jintao will attend Mr. Obama’s nuclear security summit meeting in Washington later this month. American officials had feared that Mr. Hu would skip the talks to convey China’s anger over recent diplomatic clashes, including a White House decision to sell arms to Taiwan and President Obama’s meeting with the Dalai Lama, the exiled Tibetan leader.

But this week, the drumbeat of bad news — and an underlying narrative of a rising China flexing its muscles against a debt-laden United States — has suddenly given way to talk of collaboration.

For now, the United States is setting aside the most potentially divisive issue, deferring a decision on whether to accuse China of manipulating its currency, the renminbi, until well after Mr. Hu’s visit, according to a senior administration official. That decision, the official said, reflects a judgment that threatening China is not the best way to persuade it to allow the renminbi to appreciate against the dollar.

Many economists expect China to act on its own to loosen the tight link between the renminbi and the dollar — a policy that keeps the currency’s value depressed and makes Chinese exports more competitive in global markets.

Still, the administration’s decision not to force the currency issue now could carry political risks at home. Lawmakers on Capitol Hill have introduced legislation calling for trade sanctions against China if it does not change its currency policy. And unions and manufacturers cite the undervalued Chinese currency as a major culprit for lost jobs.

The White House would not comment on the currency issue, but an official said that if China did not take action on its own, the administration could raise the issue again at the Group of 20 summit meeting in June. The White House welcomed Mr. Hu’s visit as proof that its policy of engaging with China on strategic issues of common interest had paid off.

“We have an important relationship with China, one in which there are many issues of mutual concern that we work on together,” said a White House spokesman, Bill Burton. “But there also will be times where we disagree. I think this proves the point that despite those disagreements, we can work together on issues like nuclear proliferation.”

On Wednesday, China appeared to throw its support behind new United Nations sanctions aimed at putting pressure on Iran over its nuclear program. The Security Council has been stymied by China’s insistence on diplomacy over sanctions.

American officials said they expected China to wrangle over the wording of a United Nations resolution, with a goal of watering down the measures against Tehran.

After meeting with Chinese officials in Beijing, Iran’s nuclear negotiator on Friday warned the West to back away from “threats” and suggested that China was less inclined to support sanctions than many believed. “Many issues came up in talks on which China accepted Iran’s position,” Saeed Jalili, the negotiator, said during a news conference. “We jointly emphasized during our talks that these sanctions tools have lost their effectiveness.”

In its own statements on Friday, the Chinese Foreign Ministry appeared to steer clear from any commitment for sanctions, saying that all parties should “step up diplomatic efforts, and show flexibility, to create the conditions to resolve the Iranian nuclear issue through dialogue and negotiation.”

Still, earlier this week, Mr. Obama expressed optimism that the major powers could unite this spring behind a resolution that would apply new pressure on Iran over its nuclear program.

The administration has engaged in intensive talks with Chinese officials to demonstrate to Beijing the destabilizing effect of a nuclear-armed Iran. A crucial advance, officials said, came in early March when an American delegation, led by Deputy Secretary of State James B. Steinberg and the National Security Council’s senior director for Asia, Jeffrey A. Bader, visited Beijing.

Mr. Hu’s visit will take place only two days before the Obama administration faces a deadline to decide whether to label China a “currency manipulator,” meaning that it intervenes in currency markets to gives its exporters an artificial advantage. Pressure in the United States has been building to take that step, which could initiate a Congressional process that would lead to slapping tariffs on Chinese imports.

But given the potential for embarrassing Mr. Hu — and for sending bilateral relations into another tailspin — the administration decided not to report on April 15, one of the deadlines set by Congress and the Treasury Department to issue a report on possible currency manipulation.

To avoid embarrassing Mr. Hu, the Treasury Department could delay the deadline for weeks. “As a practical matter, they’ve got a lot of wiggle room,” said Nicholas R. Lardy, an economist at the Peterson Institute for International Economics in Washington. Mr. Lardy added that he thought it was unlikely that China would have agreed to a visit by Mr. Hu unless there was at least an informal assurance by the Treasury that China would not immediately be named a currency manipulator.

Lawmakers signaled that they would not be easily mollified if the administration gave Beijing a pass on its currency.

“The most important issue in the Chinese-American relationship is currency,” said Senator Charles E. Schumer, Democrat of New York, who introduced a bill threatening China with trade sanctions. “It relates to American jobs, American wealth and the future of this country. This issue should not be traded for another.”

“President Obama underscored the importance of working together to ensure that Iran lives up to its international obligations,” the White House said in a statement after the telephone call, on Thursday Washington time, which was Friday in Beijing.

“He also emphasized the importance of the United States and China along with other major economies implementing the G20 commitments designed to produce balanced and sustainable growth.”

Although their telephone conversation did not touch on the issue of the renminbi, Mr. Obama and Mr. Hu reportedly talked about trade, the Iranian nuclear crisis and China’s positions on Tibet and Taiwan, which remains a paramount concern to the Chinese.

“The Taiwan and Tibet issues are key to China’s sovereignty and territorial integrity, and relate to China’s core interests,” the state media quoted Mr. Hu as saying. “Appropriately handling these issues is key to ensuring the healthy and stable development of U.S.-China ties.”

Relations between the countries began to fray in November, soon after Mr. Obama went to China on a state visit that was more circumscribed than American officials would have liked.

In the months that followed, tensions increased. American officials accused China of thwarting a climate change deal in Copenhagen and Chinese leaders threatened to punish the United States for a $6 billion weapons deal for Taiwan. In February, China’s Foreign Ministry called in the American ambassador for a scolding about Mr. Obama’s meeting with the Dalai Lama, whom China calls a separatist. Google’s complaints about government censorship and its decision to move its Internet search service from the mainland did not help.