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What Asia can expect after US mid-term polls

Updated On: Oct 25, 2010
A slew of China-themed political attack advertisements are hitting the airwaves in the last two weeks of campaigning before the United States mid-term elections.
"Is (Democratic Representative) Baron Hill running for Congress in Indiana - or China?," the narrator asks ominously in an ad produced by his Republican opponent. The ad suggests that the US$787 billion ($1,020 billion) economic stimulus package championed by Democrats created renewable energy jobs in China and not at home.
These commercials reflect the highly-politicised debate in the US about the causes of the anaemic economy. The Republicans claim that the Democrats' stimulus package created jobs in China instead of the US. Democrats counter that Republican-supported free trade policies and corporate tax breaks have sent jobs to China and India.
This US debate is worrying policymakers and observers in Asian countries with open economies such as Singapore. But do not confuse the politicking and scapegoating for real policymaking. The political gloves are off because both parties are vying for the support of American voters anxious and frustrated with the limping US economy.
All estimates predict Republicans will achieve a near-sweep of the Congress in the mid-term elections because voters have not been persuaded that incumbent Democrats have done enough to resuscitate the gasping job market.
So what might trade-dependent countries in Asia expect if the Republicans take control over one or both chambers of Congress and establish the political momentum to promote their agenda?
The probability of Congress using a blunt legislative hammer to address the currency dispute between the US and China will be much lower. Instead, the US will most likely adopt more multilateral approaches, mindful of not provoking a bilateral trade war with China. But free trade will remain off the table.
The Republicans, for all their campaign rhetoric blasting China, usually have more favourable views of trade and globalisation than the Democrats. Take the recent debate on the value of China's currency.
The House Bill that would punish Chinese imports was touted as bipartisan but a closer look reveals all key Republican House leaders voted against it.
The leading Republican from the powerful committee that produced the Bill and the likely new chairman who will decide if it moves forward after January, voted for the Bill but simultaneously voiced his strong disappointment of its approach.
The currency issue would not go away but the Republicans will favour other approaches to deal with the US-China trade imbalance, including pushing China to uphold US intellectual property rights, pressing them to roll back their controversial technological innovation policies and ending other non-tariff barriers that hurt US employers.
In the meantime,the Obama administration has signalled an interest in more multilateral approaches to dealing with China, with more discussions planned at the G20 meeting in the middle of next month.
The confrontational legislative approach should lose momentum. However, despite the arrival of a Republican-controlled Congress, it is a bridge too far for the US to pass the pending free trade agreements.
The Republicans face conflicting interest group pressure on trade. The electorate remains unconvinced of the benefits of trade and it would be a brave politician willing to promote this agenda until the job market starts to recover. At the same time, powerful special interest business groups have made record-breaking donations to the Republican campaigns to ensure that multinational corporations who favour free trade are cared for.
An example of the Republicans' unwillingness to adopt a particular side is their "Pledge to America," a recently-released document which lays out the issues they would immediately address upon gaining control of the House. It stayed silent on whether to move or stall the pending free trade agreements.
So expect Republicans to tread lightly on the issues that are a concern to Asia. They would not put policies in place that jeopardise their ultimate objective: Regaining the presidency in 2012.