Asian Investors Wary of Protectionism from Obama

by Steve Charles

November 24, 2008

As Chief Investment Officer in Asia for Credit Agricole Asset Management, the eighth largest retail banking group in the world, Ray Jovanovich ’84 recently shared his initial assessment on the implications of the Presidency of Barack Obama for economic relations between China and the United States.

Living in Hong Kong for decades, Jovanovich oversees Credit Agricole’s investments throughout Asia. His words offer an interesting perspective on the U.S. elections and what Asian economic leaders and investors will be watching for as the Obama transition begins.

"In sharp contrast to the 2004 Presidential Election, China was rarely in focus during the 2008 Presidential campaign; uniquely absent from the debate," Jovanovich writes. "Perhaps this was due to more pressing matters in focus: the American housing crisis, the global financial meltdown, surging unemployment and the twin wars in Iraq and Afghanistan."

"Outsourcing of jobs fared a bit better as a hot-button topic so I assume will get more attention once the next Congressional session opens. This is not good news for Asia given the following: Obama will operate with unprecedented Democratic control over all parts of the legislative process, rare in American politics. While it is true Presidential candidates campaign in poetry and govern in prose, this time could very well be different given the realities of this commanding Democratic majority on Capitol Hill."

Jovanovich sees the possibility of "protectionist legislation" as the greatest concern among Asia’s emerging economies.

"Protectionist trade legislation never comes from the Oval Office; it is the provision of Capitol Hill," Jovanovich writes. "But the Dems actually don’t even need to achieve the magic 60 seats, and one can bet at some point over the next 18 months, if the White House is deemed to be too soft on China on the subject of (unfair) trade, then it is reasonable to anticipate one of the nearly 30 pending bills in Congress (New York Senator Charles Schumer’s bi-partisan bill being the most damaging calling for punitive tariffs on all Chinese imports) addressing one or more aspects of China’s unfair advantages will come to a floor vote. It will most certainly pass, as the Dems no longer must contend with any obstacle, given the magic 60, but 57 will more than suffice. Then it will go to Obama for signature.

"Would he reject his own Party, keeping in mind Democratic control of both the House and the Senate passed to the Dems over the past two election cycles precisely with the mandate to protect American jobs and stop unfair trade? But surely Obama recognizes the damaging aspects of protectionist legislation for the U.S., the dollar and the world?"

While recognizing the "legacy mess" of the Bush Administration, Jovanovich points out that the Bush Administration took comprehensive relations with China to an unprecedented level.

For the most part, this was due to the careful and measured diplomacy delivered by U.S. Ambassador to China, Sandy Randt," Jovanovich says. "In fact, Ambassador Randt is the longest serving and only full two-term Ambassador to any country; having served the entire eight-year Bush Presidency. China was significant for the Bush Administration and Randt the instrument of engagement. Randt’s departure creates the most significant foreign policy relationship vacuum. It remains to be seen who Obama appoints; the stakes could not be higher given the current environment. It will take time to adjust the new Ambassador into this role as Randt leaves behind a big shadow."

Pictured: Credit Agricole Chief Investment Officer for Asia Ray Jovanovich ’84


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