Obama tackles China, Pakistan, and the Eurozone debt crisis

President Obama opined on Chinese currency legislation, Pakistani double dealing, and the European debt crisis during his Thursday morning press conference, which was supposed to focus on his jobs bill. Here are the foreign policy highlights of his remarks.

On Chinese currency manipulation:

Obviously we’ve been seeing a remarkable transformation of China over the last two decades, and it’s helped to lift millions of people out of poverty in China. We have stabilized our relationship with China in a healthy way. But what is also true is that China has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States. And I have said that publicly but I’ve also said it privately to Chinese leaders.

And currency manipulation is one example of it, or at least intervening in the currency markets in ways that have led their currency to be valued lower than the market would normally dictate. And that makes their exports cheaper and that makes our exports to them more expensive. So we’ve seen some improvement, some slight appreciation over the last year, but it’s not enough.

It’s not just currency, though. We’ve also seen, for example, you know, intellectual property, technologies that were created by U.S. companies with a lot of investment, a lot of up-front capital, taken, not protected properly, by Chinese firms. And we’ve pushed China on that issue as well. Ultimately, I think that you can have a win-win trading relationship with China. I’m very pleased that we’re going to be able to potentially get a trade deal with South Korea. But I believe what I think most Americans believe, which is trade is great as long as everybody is playing by the same rules.

On the legislation to penalize currently manipulation currently being considered by Congress:

My main concern — and I’ve expressed this to Senator Schumer — is whatever tools we put in place, let’s make sure that these are tools that can actually work, that they’re consistent with our international treaties and obligations. I don’t want a situation where we’re just passing laws that are symbolic, knowing that they’re probably not going to be upheld by the World Trade Organization for example, and then suddenly U.S. companies are subject to a whole bunch of sanctions. We’ve got a — I think we’ve got a strong case to make, but we’ve just got to make sure that we do it in a way that’s going to be effective.

Last point is, my administration has actually been more aggressive than any in recent years in going after some of these practices. We’ve brought very aggressive enforcement actions against China for violations in the tire case for example, where it’s been upheld by the World Trade Organization that they were engaging in unfair trading practices, and that’s given companies here in the United States a lot of relief.

So, you know, my overall goal is, I believe U.S. companies, U.S. workers, we can compete with anybody in the world. I think we — we can make the best products. And a huge part of us winning the future, a huge part of rebuilding this economy on a firm basis — that’s not just reliant on, you know, maxed-out credit cards and a housing bubble and financial speculation, but is — is dependent on us making things and selling things — I am absolutely confident that we can win that competition. But in order to do it, we’ve got to make sure that we’re aggressive in looking out for the interests of American workers and American businesses, and that everybody’s playing by the same rules, and that we’re not getting — getting cheated in the process.

On Pakistan’s hedging strategy:

With respect to Pakistan, I have said that my number-one goal is to make sure that al-Qaida cannot attack the U.S. homeland and cannot affect U.S. interests around the world. And we have done an outstanding job, I think, in going after directly al-Qaida in this border region between Pakistan and Afghanistan. We could not have been as successful as we have been without the cooperation of the Pakistan government. And so on a whole range of issues, they have been an effective partner with us.

What is also true is that our goal of being able to transition out of Afghanistan and leave a stable government behind — one that is independent, one that is respectful of human rights, one that is democratic — that Pakistan I think has been more ambivalent about some of our goals there. And you know, I think that they have hedged their bets in terms of what Afghanistan would look like, and part of hedging their bets is having interactions with some of the unsavory characters who they think might end up regaining power in Afghanistan after coalition forces have left.

What we’ve tried to persuade Pakistan of is that it is in their interest to have a stable Afghanistan; that they should not be feeling threatened by a stable, independent Afghanistan. We’ve tried to get the conversations between Afghans and Pakistans (sic) going more effectively than they have been in the past. But we’ve still got more work to do. And there is no doubt that there’s some connections that the Pakistani military and intelligence services have with certain individuals that we find trouble (sic). And I’ve said that publicly and I’ve said it privately to Pakistani officials as well.

On the Pakistan-India relationship:

[The Pakistanis] see their security interests threatened by an independent Afghanistan, in part because they think it will ally itself to India, and Pakistan still considers India their mortal enemy. Part of what we want to do is actually get Pakistan to realize that a peaceful approach towards India would be in everybody’s interests and would help Pakistan actually develop — because one of the biggest problems we have in Pakistan right now is poverty, illiteracy, a lack of development, you know, civil institutions that aren’t strong enough to deliver for the Pakistani people. And in that environment you’ve seen extremism grow. You’ve seen militancy grow that doesn’t just threaten our efforts in Afghanistan but also threatens the Pakistani government and the Pakistani people as well.

So trying to get that reorientation is something that we’re continuing to work on. It’s — it’s not easy.

On cutting off aid to Pakistan:

You know, we will constantly evaluate our relationship with Pakistan, based on, is overall this helping to protect Americans and our interests?  We have a great desire to help the Pakistani people strengthen their own society and their own government. And so, you know, I’d be hesitant to punish, you know, aid for flood victims in Pakistan because of poor decisions by their intelligence services. But there’s no doubt that, you know, we’re not going to feel comfortable with a long-term strategic relationship with Pakistan if we don’t think that they’re mindful of our interests as well.

On the European debt crisis:

The biggest headwind the American economy is facing right now is uncertainty about Europe, because it is affecting global markets. The slow-down that we’re seeing is not just happening here in the United States: It’s happening everywhere. Even in some of the emerging markets like China you’re seeing greater caution, less investment, deep concern.

I speak frequently with Chancellor Merkel and President Sarkozy. They are mindful of these challenges. I think they want to act to prevent a sovereign debt crisis from spinning out of control, or seeing the potential breakup of the euro. I think they’re very committed to the European project. But their politics is tough because, essentially, they’ve got to get agreement with not only their own parliaments, they’ve got to get agreement with 20 parliaments, or 24 parliaments, or 27 parliaments. And engineering that kind of coordinated action is very difficult.

You know, but what I’ve been seeing over the last month is a recognition by European leaders of the urgency of the situation. And nobody’s, obviously, going to be affected more than they will be if the situation there spins out of control. So I’m confident that they want to get this done. I think there are some technical issues that they’re working on in terms of how they get a big enough — how do they get enough fire power to let the markets know that they’re going to be standing behind euro members whose — you know, who may be in a weaker position. But they’ve got to act fast.

And we’ve got a G-20 meeting coming up in November. My strong hope is that by the time of that G-20 meeting, that they have a very clear, concrete plan of action that is sufficient to the task.