In the Arena

Obama’s Iran and China Challenge

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In this week’s print column, which can be found here if you’re a TIME subscriber, I deal with two foreign policy challenges that may well crash through the all-economy, all-the-time nature of the coming presidential campaign–China and Iran. The President is thinking long and hard about both right now, but these are not easy issues to deal with:

Iran is less important than China, but more dangerous. The Administration is particularly worried about Iranian mischief-making as U.S. troops leave Iraq over the coming weeks. With a smaller military footprint, Iraqi militias armed with Iranian weapons, can get close enough to US diplomatic facilities to do real damage with rocket attacks. What happens if the terrorists get “lucky” and score a direct hit on the US embassy in Baghdad or the consulate in Basra, killing US diplomats? There is a growing feeling, among some in the Administration, that an appropriate and proportionate response would be to bomb an Iranian rocket factory or two, or to hit the Quds Force training bases located near the Iraqi border. “There is a certain appeal to kicking Iran in the teeth as we go out the door,”  one regional expert told me. Of course, that sort of attack–which the region’s Sunnis, especially the Saudis, would love–could precipitate an escalation that would end in an all-out Sunni-Shi’ite conflict in the region.

There are others in the Administration who believe that another effort should be made to engage the Iranians in negotiations. In late 2010, the Iranians approached Richard Holbrooke and suggested talks on Afghanistan, where US and Iran interests coincide–the Obama Administration refused to bite, insisting that Iran’s nuclear program had to be addressed first before any other issues were broached. Approaching the Iranians with a multi-track negotiation proposal–nuclear program, Afghanistan, diplomatic recognition–isn’t impossible, but it’s hardly likely: the Iranian government has been in turmoil ever since the 2009 stolen election, and the intransigent hard-liners (i.e. those who make Mahmoud Ahmadinejad seem a moderate) are in charge.

It’s not known which way the President is leaning on Iran, but various sources tell me he is thinking very hard about China right now, but the Administration is boggled, so far, about how to respond on the one foreign policy issue–China’s mercantilist ascendancy–that the public cares most about. Already, Mitt Romney has abandoned his free-trade tendencies to propose tariffs on the Chinese for currency manipulation (most recently, at the Michigan debate last night). “Currency manipulation is a problem,” an Administration source told me. “But it’s not as big a problem as the Chinese forcing American companies to give away their intellectual property in return for access to the China market.”

The problem is, what to do about it? American corporations complain constantly to the Administration about the Chinese practices, but ultimately they succumb to Chinese pressure–as General Electric did earlier this year, in a deal involving jet engines. “We need to have a united front from the business community, if we want to take effective action,” an Administration official said. But even if such a front were created, how could the US convince Europe and other industrial giants to join a general boycott of Chinese deals involving intellectual property concessions?

In Michigan last night, Jon Huntsman–who knows a thing or two about China–pointed out that if we slap tariffs on Chinese products because of currency manipulation, the Chinese can slap tariffs on our products, claiming that the Federal Reserve’s “quantitative easing” polices are also a form of manipulation. “Then you have a trade war,” he said.

Huntsman was precisely right, but it’s a fine point–too fine a point to drive home in a televised debate. Meanwhile, Romney can whack the Chinese without worry on the campaign trail. It’s a strategy that worked for Bill Clinton in 1992. Of course, Clinton reversed his position not long after taking office and ultimately led the charge that admitted China into the World Trade Organization. Romney has been known to reverse a position or two as well.

The problem for Obama is that he has said next to nothing about this vexing problem during his three years in the White House. He hasn’t even explained why it’s such a vexing problem. I suspect he now knows that he’s going to have to say something about China pretty soon–it’s the worst kind of foreign policy problem: one that’s also a domestic policy problem. Indeed, it goes to the very core of the economic concerns plaguing most Americans.