President Barack Obama meets fellow Group of 20 (G20) leaders in South Korea humbled by a US electorate that dealt his Democratic Party a severe blow last week at the polls. But don't expect the US president to be more accommodating to his counterparts. If anything, Obama is likely to step up pressure on other global powers to help the world's largest economy pull out of a prolonged slump.
Republicans gained control of the House of Representatives last week and curbed Democrats' majority in the Senate. Paradoxically, the landslide election defeat could actually help Obama present a more united front in pushing US trade policy abroad.
"The year 2011 could be a very productive year for the trade agenda," said John Murphy, vice president of international policy at the US Chamber of Commerce. "A White House that has repeatedly said it wants to move forward on trade will now have a leadership in Congress that agrees."
With fiscal wiggle-room constrained at home, Obama was already turning abroad for solutions to the economic crisis before he received a self-described "shellacking" at the hands of opposition Republicans in last week's congressional election. "One of the keys to creating jobs is to open markets to American goods made by American workers," Obama said Friday before leaving on his 10-day Asia tour, which will also include stops in India, Indonesia and Japan. "Our prosperity depends not just on consuming things, but also on being the maker of things."
Obama has called for a doubling of US exports in five years, hoping to create jobs at home by reducing a current account deficit - 46.3 billion dollars in August - that has been a huge burden on the economy. He pledged to finish renegotiating a long-stalled free-trade deal with South Korea by the G20 summit in Seoul November 11-12.
In a US capital that has become deeply polarised, opening foreign markets could be one of the few areas in which Obama finds a helping hand in Republicans and the US business community. The Republican Party has traditionally trended more towards expanding trade opportunities than Obama's own, labour union-backed Democrats.
"If the president wants to lead (on trade), he'll have a willing partner," Republican congressman Kevin Brady, who is in line to head a House panel on trade, told the National Journal magazine. Much of Obama's trade strategy has involved pressuring China and other emerging powers to shift away from exports and boost domestic consumption. US consumers who once powered the global economy are by contrast starting to save more and spend less.
The key to that "rebalancing" lies in exchange rates, and the US is pushing hard for China to allow its yuan currency to appreciate at a fast pace. US lawmakers have drafted a law that could impose tariffs on China if it does not comply.
The ongoing currency dispute is likely to top the G20 agenda when leaders of the most powerful industrial and developing economies meet in Seoul. Noises from Europe and even Brazil have suggested there could be a united front in dealing with China. Obama's chances of reaching a compromise at the G20 might also be aided by the US election. Republicans could force Obama to make good on a key demand of European and Asian powers - reining in a budget deficit that hit 10 per cent of economic output in 2009.
"Historically, the periods in which the United States has done best in lowering deficits are periods of divided government," Murphy said. A commitment to cutting spending could help convince other G20 members that the US will hold up its end of the rebalancing bargain.
Obama's trade push comes with the United States in one of the worst economic positions of any G20 member. Government figures Friday found the unemployment rate stuck at 9.6 per cent, while the economy grew just 2 per cent in the third quarter. The sluggish recovery has kept the United States on a collision course with other global powers as it looks for ways to stimulate growth, while others look to cut back on deficits and roll back emergency steps taken at the height of the 2008-09 economic crisis.
The US Federal Reserve last week announced plans to buy 600 billion dollars in government debt over the next eight months in a bid to lower interest rates and nudge investors into the real economy. The Fed's move angered other governments by pushing the value of the dollar to 2010 lows against major currencies. Yet the weaker dollar fits into Obama's overall trade agenda, and while he is likely to face criticism from allies, here too he is unlikely to find much disagreement from Republicans or US businesses.
That makes trade "precisely the opportunity for them to work together," according to Professor David Lublin of American University in Washington. "The question is: Are (Republicans) more wanting to get this part of their agenda accomplished, or do they want to deny the Obama administration even minor victories?" Lublin asked.
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