In 2007, I published a review essay in Foreign Affairs explaining how then-Prime Minister Shinzo Abe was compensating for Japan's relative economic decline by reducing anachronistic constraints on the Japanese self-defense forces and aligning more closely with other maritime democracies, beginning with the U.S.-Japan alliance. Unfortunately for Japan -- and the shelf life of my piece -- Abe abruptly resigned a few months later after a sudden wave of missteps, political bad luck, and failing health. Over the next five years Japan suffered through multiple leadership transitions, with two Liberal Democratic Party (LDP) prime ministers and three Democratic Party of Japan (DPJ) prime ministers all stumbling at the starting line because they were unable to make any headway with Japan's stagnant economy. Abe, meanwhile, kept a low profile.

But as China upped the pressure on Japan over the contested Senkaku Islands, the LDP turned to the hawkish former prime minister last year to help them retake the government and restore Japan's self-confidence. Learning from his past errors, Abe has focused his early months on jump-starting the economy through "Abenomics" -- a combination of quantitative easing, stimulus spending, and promises of structural reform to increase productivity. Thus far it has worked: The markets and business confidence are up and Abe is the first prime minister in memory to see his personal support rate actually rise in office (now at 75% in some polls). In an energetic speech at the Center for Strategic and International Studies in Washington on Friday, he declared to the audience that "Japan is back."

Abe's return seemed initially to confuse the Obama administration. His values-based, balance of power approach resonated much more with George W. Bush's second inaugural than the minimalist and risk-averse foreign policy vision President Obama has put forth for his second term. The administration also appeared spooked by Abe's intemperate campaign comments about the need to revisit Japan's previous official apologies to China and Korea. Numerous stories emerged before his visit to Washington citing unnamed senior U.S. officials promising to publicly shame Japan if the Abe administration went too far with historical revisionism. The pattern looked eerily reminiscent of what happened between the Obama administration and Bibi Netanyahu in the first term. For its part, the Japanese side was equally uncertain about seeming wobbliness in U.S. declaratory policy on the Senkaku issue since Hillary Clinton's departure and by John Kerry's promise in his confirmation hearings to "grow the rebalance towards Beijing" (it did not help that Chinese official editorials praised Kerry for having the wisdom not to "meddle" in Far Eastern affairs the way his predecessor had).

In the end, though, the Abe-Obama summit on Feb. 22 was a success for both sides. Since coming to office, Abe has moderated his stance on history issues and was firm but gracious towards China and especially South Korea in his CSIS speech. In the Oval Office press availability, President Obama reaffirmed that Japan is the "central foundation" of U.S. security policy toward the Pacific (though he sounded like he was searching for a teleprompter when he said it). The two leaders echoed each other on the need for a UN Security Council Chapter 7 resolution to deal with North Korea's recent nuclear test and there was little outward sign of frustration over the usual irritants on Okinawa base realignment. Even on the trans-Pacific Partnership (TPP), where expectations were low, there was much more substance than met the eye. In a skillfully worded joint statement on Japan's possible participation in TPP, the U.S. side reaffirmed its position that all sectors had to be on the table and Abe restated the LDP campaign pledge that Japan would not commit to opening all sectors. That little piece of kabuki now allows Abe to state that he will seek to protect the rice market in negotiations and the administration to claim that all sectors will indeed be subject to negotiation. The Japanese delegation had a quiet spring in their step after the summit and were keen to move on TPP in a matter of weeks, slowing down mainly to accommodate the administration's need to line up support on its side (though Abe will have his own challenges within the LDP, to be sure). While the U.S. press was generally confused by the language on TPP, Congressional opponents of free trade knew what the joint statement meant right away, expressing their alarm within hours of the bilateral summit.

Abe has a lot to deliver still, and he knows it. "Abenomics" will run out of steam without real deregulation and reform (hence the Japanese business community and bureaucracy's enthusiasm for TPP as an action-forcing agreement). He also has to win the Upper House election scheduled for July, since failure to control both houses of the Diet has done in every prime minister since Koizumi. But Abe has begun to build up a head of steam. I have sat across the table from the last six Japanese prime ministers, and I always watch the faces of the political aides and senior bureaucrats behind them. I haven't seen such confident expressions since Koizumi was in the job.

The United States, protected by two oceans and with a global range of allies and interests, has found for a century that it must go abroad to shape and lead a dangerous world. But President Barack Obama seems, in some respects, to prefer to stay home. Whereas George W. Bush's foreign policy was maximalist, Obama's is minimalist. A foreign policy assessment only halfway through his presidency is no doubt unfair -- he may yet vanquish Iran's nuclear weapons program, put an overdue end to Syria's bloody civil war, stand down Chinese aggression in Asian waters, and oversee a historic wave of trade liberalization. But he has not yet. The Obama Doctrine appears less ambitious. Here are its elements to date:

Nation-building at home, not abroad. President Obama took office so determined to "end the war" in Iraq that he failed to negotiate a follow-on force to sustain stability there. In Afghanistan, after a decade of allied sacrifice and real gains, the administration astonishingly is now flirting with the "zero option" of leaving no U.S. forces there after 2014. Obama prefers to focus on "nation-building at home." But will he be able to if Iraq or Afghanistan backslide into civil war, or if Syria's violent spillover engulfs the Middle East? For all the tactical efficacy of drone strikes, the United States cannot possibly defeat terrorism without at the same time working to build free and prosperous societies in countries, like Pakistan, that nurture it.

Resisting transformationalism. Notwithstanding excellent speeches about bridging the gap between America and the Muslim world, President Obama has treaded more gingerly in his policies. He did not support Iran's Green Revolution and has stood back from the opportunities inherent in the Arab Awakening, allowing post-strongman societies in the Middle East to devise new political arrangements for themselves. Obama has a nuanced understanding of the limits of power and the tragedy of international politics from his oft-cited reading of Reinhold Niebuhr. But the greater tragedy may be declining to use America's great power to more actively support Arab and Iranian liberals desperate to build free societies against fierce opposition from Islamist and ancien regime forces.

 "Leading from behind." In Libya, Syria, and now Mali, we have seen Washington's European allies push for, or carry out themselves, armed interventions to uphold human rights and regional stability. Americans are used to being the hawks in world affairs, and Europeans the doves -- but those roles have reversed under President Obama. This turns the transatlantic bargain on its head: Europeans now seem more concerned with policing out-of-area crises, with America playing a supporting role. But is such passivity really in Washington's interest? Can Europe really lead in matters of war and peace without America at the front? 

Rebalancing American power toward Asia. America's "pivot" has been welcomed in much of Asia and across party lines in Washington. But as Joseph Nye argues, the United States has been pivoting to Asia since the end of the Cold War. It would be more accurate to say that Obama himself pivoted away from seeking a G-2 condominium with China to balancing against it. His administration's support for liberalization in Myanmar has been historic -- but senior U.S. officials say the process is driven by Naypyidaw, not Washington.  It is also unclear if the pivot is more than a rhetorical policy; President Obama has already authorized defense budget cuts of nearly $900 million and supports more.

Unsentimentality towards allies. Even amidst the rebalance, Asian allies like Japan and friends like India have felt neglected by this American president. Similarly, Obama's attention to the transatlantic relationship seems inversely proportional to the affection Europeans feel for him. Despite significant defense transfers, the U.S. administration appears as concerned with preventing Israel from attacking Iran as preventing Iran from developing nuclear weapons. Hard-headedness is a virtue in international relations. America's allies, however, expect it to be directed more at U.S. adversaries than at our friends.

A trade policy high in ambition, if not results. President Obama commendably seeks to double U.S. exports as part of an economic recovery program. His administration has sketched out a transformative vision of an Atlantic marketplace and a Trans-Pacific Partnership. But movement on both has been very slow -- at least as slow as the three years it took for Obama to send Congress free trade agreements, with Korea and other countries, negotiated by his predecessor. The potential for an ambitious trade opening is promising -- if Obama can deliver.

President John F. Kennedy said America would pay any price and bear any burden in support of liberty. President Obama has made clear that under his leadership, America will not do quite so much. But strategic minimalism and a focus on the domestic means problems abroad only grow, inevitably pulling America into crises on less favorable terms. The world looks to America for strategic initiative to solve its thorniest problems. At the moment, demand for this leadership is greater than supply.

This article appeared over the weekend in the special Security Times edition prepared for the Munich Conference on Security Policy and published by Germany's Times Media. The paper as it appeared in print is available at www.times-media.de .  

A relentlessly-optimistic Dan Drezner has thrown down the gauntlet! (Well, more like a dinner napkin, really, but same idea). He defends the prospects for trade progress in President Obama's second term and descends from generalized good cheer into specifics. With a meal on the line, he writes:

"I'm willing to bet that at least two out of the following four things will happen during Obama's second term: 

1)  A Trans-Pacific Partnership that is ratified by Congress;

2)  Bilateral investment treaties with India and China;

3) A transatlantic integration agreement;

4)  A new services deal within the auspices of the WTO."

I accept.

Now, for those of you wagering at home -- not that Foreign Policy condones such behavior -- the question is not just which of us has the clearer crystal ball; you also want to think about the point spread. Over at Cato, Simon Lester offers some initial guidance to eager bookies:

"I would rate the chances of seeing completed China/India investment treaties or a U.S.-EU FTA at close to zero; a ratified TPP at around 10 percent; and a WTO services agreement at around 25 percent."

While I like the implication -- a 97.5 percent chance that I feast at Drezner's expense -- I would differ a bit on the odds.

The challenge of handicapping these events is that they are not precisely defined. A "transatlantic integration agreement" could run anywhere from an accord that promises modest services integration and regulatory cooperation to a full-fledged free trade agreement between the United States and the European Union. A bilateral investment treaty could range from a new consultation mechanism to adoption of the complete U.S. model BIT.

Thus, a central question: How readily can the Obama administration push through a minimalist version of any of these trade measures? There is a clear incentive to do so. Agreements ought to be easier if you can drop the hard parts. Signed and passed agreements constitute a legacy. Only quibbling trade geeks will ever weight the virtue of those agreements by the extent of their coverage. This is one reason for the long history of bilateral or plurilateral trade agreements around the globe that delivered very modest amounts of liberalization: they all delivered a signing ceremony for leaders.

Yet there are some significant obstacles to "going lite." Here are four:

1. Commercial significance. It would be dramatically easier to negotiate the TPP if issues such as intellectual property or state-owned enterprises were omitted. Those issues are divisive both within the United States and between participating countries. Yet they are on the agenda because key industries care about them and see opportunity in regulating the behavior of trading partners. While the Obama trade legacy will not be significance-weighted, there needs to be a minimum level of business enthusiasm to get an agreement through.

2. Balance. Any agreement has to offer something for each party. The narrower the agreement, the less likely all the participants come away with something they like. This is a problem with a services-only deal within the WTO: Usually developed countries are demandeurs for services market access while developing countries are demandees. Of course, the developed countries could go off on their own and sign a plurilateral services agreement among themselves (still under WTO auspices), but that poses some problems. It does not win domestic services firms the market access they crave, it ticks off the developing countries who have been circumvented, and it may limit negotiating space for any future, broader WTO agreement that might draw the developing countries in.

3. Leverage. In the early days of post-war trade talks, agreements came along every couple years. If your industry's concerns were not taken up in one round, you could be reasonably confident you could push for them in the next. In the last forty years, though, there have been only two completed global trade agreements (the Tokyo and Uruguay Rounds). FTAs have been concluded more frequently, but generally only one per country pair. Now suppose you're a U.S. agricultural producer with longstanding concerns about European agricultural practices. How do you react to the prospects of a limited U.S.-EU trade deal that leaves out agriculture? You hate it. You probably think that this is your moment of maximum leverage to reform EU policies; a limited agreement gives that leverage away. The argument would be similar for a modest BIT with India or China; anyone with investment concerns might see a limited agreement as worse than no agreement at all, since the chances of revisiting the topic would be small.

4. Precedents/Congress. The United States has been relatively formulaic in its approach to trade agreements, moving from the NAFTA model, to "NAFTA+" to "Chile+" - the same basic structure, with a few improvements. No major deviations from the same 'high standards' model of a trade agreement. That was one of the attractions of the TPP -- it was a group of countries who had committed to a fuller, deeper version of trade liberalization, matching the U.S. standard of depth and breadth. A standardized approach solves two particular challenges for U.S. trade policy. First, the country undertakes multiples negotiations, spread over time. Second, any administration must reach an understanding with Congress, which has constitutional authority over trade. A fixed template makes it harder for successive trading partners to try to exempt sensitive sectors. It also means that carefully negotiated understandings with Congress need not be reworked with every agreement. While an FTA- or BIT-lite may ease external negotiations, it can complicate discussions with Congress and with future trading partners.

So a 'lite' approach may be hard to swallow.

There is certainly more to chew on as we think over trade prospects for the next term. I have yet to cook up a full alternative set of odds. But am I confident in my skepticism? You bet.

For the past decade, it has been virtually impossible to attend a conference or panel discussion on United Nations reform without someone within the first five minutes making the point that the current lineup of permanent UN Security Council members is a hopelessly archaic snapshot of great powers in 1945 and desperately needs updating. I have long agreed, and even indulged in that talking point myself on numerous occasions. [Sidenote: A tip for students and interns looking for an easy way to get senior policy leaders to notice you and nod in agreement at cocktail receptions -- if there is ever a lull in the policy chatter, just clear your throat and solemnly make this point about U.N. reform. And if one of your friends who read this beats you to it in the conversation, other reliable stand-bys include saying "You know, I really think the US needs to think more strategically" and "I must say, our national security system is broken and really needs a comprehensive interagency reform, just like Goldwater-Nichols."  Of such points are blue-ribbon task forces and future conferences made...] 

But every now and then -- every four years to be precise -- something happens in world affairs that shows perhaps the current P-5 membership of the U.S., China, UK, Russia, and France isn't necessarily so obsolete after all. Yes, the Olympics. Looking at the medal tables from the just-concluded London Olympics, the top four medal winning countries also happen to be four permanent members of the UNSC: the U.S., China, UK, and Russia. And the fifth permanent UNSC member, France, is not far behind at all at eighth in the medal rankings.  Furthermore, the countries ranked fifth and sixth in the medal tables are Germany and Japan, both of whom have for years been making credible claims for permanent UNSC membership.  Nor is this year a fluke. The 2008 Beijing Olympics had the same four countries atop the medal tables, with France even closer in sixth place, while Germany and Japan were fifth and eleventh, respectively.  

What, if anything, do the Olympics tell us about measurements of national power? This is admittedly a question with a touch of frivolity -- perhaps all that the medal tables tell us is which countries are most devoted to sports. But as Victor Cha and other scholars have pointed out, sports have never been insulated from geopolitics. Even a cursory glance at past Olympics reveals this, whether Jesse Owens' one-man rebuttal of Hitler's racialism at the 1936 Berlin Games, the legendary "Blood in the Water" Hungary-USSR water polo match at the 1956 Olympics in the shadow of the Soviet invasion of Hungary, the reciprocal boycotts staged by the United States and Soviet Union in 1980 and 1984, or even China's use of the 2008 games to assert its global power status. As even a realist like Steve Walt has confessed, the Olympics can tap into and fuel incipient nationalist sentiments among the otherwise unsentimental.

Here I thought it would be interesting to look at Olympic medal counts in comparison with more traditional metrics of national power, such as GDP and defense budgets. (GDP and military expenditures are both admittedly crude proxies for national power; for a more extensive exploration of how power might be measured, see my American Interest article on same.) In putting together the table below, I listed the top 10 countries in total medals won at the London Olympics, and below them for comparison added six other countries that are generally considered "rising powers" in global affairs: India, Brazil, Saudi Arabia, Mexico, Turkey, and South Africa. I then listed each nation's global rank in total GDP (nominal) and in defense spending. This is just a whimsical first cut, of course, so any political scientists out there are quite welcome to apply some methodological rigor and see if there are any genuine findings to be had.

What does this tell us? Overall that wealth, military spending, and Olympic success seem to go together -- not too surprising. The national characteristics necessary to produce Olympic-level elite athletes seem to involve a blend of hard and soft power quotients. The most obvious hard power dimension is economic; nations with more wealth are able to devote more resources to supporting Olympic training and facilities. Population levels are certainly a factor, but in relation to overall wealth. In the domain of soft power, nations with functioning governance can effectively direct their resources for determined purposes, such as developing a system to encourage Olympic athletes. Some dimension of culture is another soft power quotient that may play a part, for the self-evident reason that cultures that value sports in general, and in many cases particular sports, are more likely to produce Olympic athletes. To take just one example, as a former water polo player I've always been fascinated by the tremendously disproportionate number of elite water polo teams who come from south-central Europe, principally Hungary and the former Yugoslavia. The fact that three out of the four final teams in water polo this year were Serbia, Croatia, and Montenegro shows what a powerhouse the remnants of Yugoslavia remain. Or Jamaica in track and field, which despite its meager power measurements on traditional metrics (e.g. military, economy, governance) has produced the world's finest sprinting program. Or Romania in gymnastics, and so on. 

The other side of the coin is countries that are ascendant as economic and/or military powers but who still punch below their weight at the Olympics. From the table above, the three countries that stand out the most are India, Turkey, and Saudi Arabia -- all of which rank much higher in GDP and defense spending than in Olympic medal counts. This is understandable given that ascendant powers usually first focus on getting their fundamentals of economic growth, infrastructure, and defense on track before devoting national resources to sports sponsorship. Conversely, Olympic results are often a lagging indicator for declining powers. Nations such as Russia that are otherwise in relative economic and military decline still produce  Olympic successes, perhaps partly due to the inherited infrastructure and tradition of supporting elite Russian athletes.

Overall the American successes in London are perhaps another small but telling indicator that American decline is not yet upon us.  Now that the Olympics are over, here in Texas we are looking forward to the start of football season. As long as the United States still has football season come around every fall, I won't worry too much about American decline.  

By Aaron Marr Page, Attorney for the Ecuadorians suing Chevron

It is disappointing that José Cárdenas feels the need to throw in a little gratuitous boosterism for Chevron in the middle of an important foreign policy discussion about trade. Chevron is overtly trying to destabilze U.S.-Ecuador relations as part of a self-serving strategy to escape legal accountability for egregious misconduct in Ecuador's Amazon. Cárdenas uncritically recites Chevron's talking points about being the victim of a judicial "shakedown" when in fact overwhelming scientific evidence produced by Chevron itself (and as found by multiple courts) concluded that the oil giant has committed monstrous environmental abuse in Ecuador, decimating indigenous groups and causing an outbreak of cancer. For a summary of the evidence against Chevron, see this video here and this document here.

It was Chevron that insisted the claims filed by more than 30,000 indigenous people and Amazon residents be heard in the courts of Ecuador, declaring the courts in 14 affidavits fair and just. Once the trial started in 2003 and the evidence pointed to Chevron's guilt, the company started a public relations and diplomatic campaign to taint Ecuador of which trade lobbying is an important component. Ecuador's government estimates that cutting trade preferences could negatively impact 320,000 jobs, but to Chevron that's a small price to pay if it means it can politically engineer the legal outcome it seeks.

Chevron was right about the competence of Ecuadorian courts: they performed admirably, supervising an 8-year trial that included over 50 judicial site inspections and the submission of over 100 detailed expert reports containing over 64,000 scientific results from soil and water samples. Dozens of witnesses testified and each and every one of the company's legal defenses was thoroughly briefed and analyzed in the trial court's 188-page final judgment. Classified State Department cables released by Wikileaks reveal that the company repeatedly admitted to U.S. diplomatic staff in private that it had "no real complaints about the administration of the case." See here. Chevron has tried to undermine the rule of law at every turn. For a summary of Chevron's strategy of harassment, delay, obstruction, and misconduct, see this sworn affidavit.

Chevron is now engaged in an ugly bit of diplomatic theater in an effort to end-run a case that it lost. The last time Chevron stormed Capitol Hill with lobbyists to destabilize the trade relationship with Ecuador, twenty-six members of Congress wrote to ask the USTR to steer clear of the issue. As the Los Angeles Times wrote at the time, "punish[ing] Ecuador because its government refuses to halt a private lawsuit against the oil giant" would "harm broader U.S. interests" and "create needless ill will in a region where President Obama has promised to end North American bullying."

José R. Cárdenas responds: "Examples of judicial misconduct and political interference in the Chevron case have been well-documented.  I stand by my comments."

Late last week, President Obama unveiled his concept for a slimmed-down trade team. He proposed consolidating six existing agencies into one new body focused on global commerce. The headline change was the merging of the United States Trade Representative's office with large chunks of the Department of Commerce.

There are reasons to question how serious the president might be about the plan. A roll-out on the Friday before a three-day weekend in Washington is not so much "prime time" as "wee hour infomercials." The president also seems to have neglected to keep key Congressional leaders apprised of his thinking -- rarely a recipe for successful cooperation. Congress tends to care deeply when reorganizations change the jurisdiction of its committees. Congress also has a particular interest in trade, since Article 1, Section 8 of the Constitution grants the legislature authority over the topic.

This all has led some skeptics to wonder whether this might be simple election-year positioning. It could be a trifecta play for independent voters: reform government, promote trade, and demonstrate Congress' truculence (after deliberately provoking it). Or perhaps it's just a wry, vestigial tribute to departing pro-trade Chief of Staff William Daley.

Whatever the case, the proposal raises at least a couple major concerns:

1. Should there be a White House trade agency?

Once upon a time, trade was handled out of a cabinet agency -- State. There was concern that State might put too much emphasis on striking deals with foreign counterparts and not give enough weight to domestic concerns. So, in the early 1960s, Congress and President Kennedy created USTR's precursor, the Special Trade Representative, as part of the Executive Office of the President. In 1979, the STR grew into USTR.

With the benefit of a few decades experience, is there any good reason to retain a trade agency in the White House, as opposed to nestling it into a cabinet agency? Yes.

In describing its latest proposal, the White House states: "[T]here are six major departments and agencies that focus primarily on business and trade in the federal government." The key word in that claim is primarily. The modern trade agenda involves a significantly larger number of government agencies. When financial services are on the table, Treasury is concerned. When intellectual property questions arise, there's the Patent and Trademark Office. When the discussion turns to beef market access, it's Agriculture. On export control questions, Defense speaks up. Almost every trade agreement raises diplomatic (State) and economic (CEA) questions and could well have an impact on workers (Labor) and business (Commerce). The list goes on.

For this reason, trade issues are commonly hashed out through an interagency process. With the benefit of its position in the White House, USTR serves as an impartial chair of this policy process. If USTR and the trade-related components of Commerce were to merge, how would an administration handle interagency disputes? Of course, a White House body like the National Security Council or the National Economic Council could play the impartial chairing role, but that would require a vastly expanded support staff to cover the broad range of intricate issues. That could effectively mean a re-creation of the current USTR, resulting in minimal savings.

Or the administration may just be arguing that it cares only about export promotion, the traditional domain of the Commerce Department. That would be consistent with the President's mercantilist view of trade, in which exports are good and imports are better left unmentioned. But it would be bad policy.

2. Is this trade process politics in lieu of actual trade progress?

This is not the first trade process reform advocated by the administration. In August 2009, President Obama launched a review to reform the U.S. export control system. Over two years later, progress has been minimal. It is the same sort of issue that requires Congressional action and threatens committee jurisdictions.

To avoid lengthy delays with his latest reform, the president is seeking a version of "fast track" authority from Congress to conduct the reorganization. This request comes just months after refusing to seek new "fast track" authority to pursue actual trade liberalization. When Senate Minority Leader Mitch McConnell (R-KY) tried to attach such authority (Trade Promotion Authority, or TPA) to the September trade package, opponents argued that the issue was too complicated and needed a more thorough rethink. Yet, years after TPA lapsed, no rethink or request has been forthcoming from the White House. TPA not only paves the way for a trade agreement to move through Congress, it also provides crucial signals in the negotiating stage about whether any given White House trade stance will have Congressional backing.

This choice of agency reorganization over trade negotiating authority may sound hopelessly arcane to any but the most devoted Beltway trade devotee. There are some serious foreign policy implications, however.

If history is any guide, the president will devote limited political capital to pushing trade matters through Congress in the foreseeable future (he devoted none over his first two years). He has just declared that his priority will be a contentious organization chart reshuffle. If this is in lieu of TPA, then the president will have no hope of getting trade agreements through Congress in the near future. If that's the case, his vaunted Trans-Pacific Partnership will be little more than endless talk. And, if that's the case, his trumpeted pivot to Asia will have lost its economic pillar.

The president just asked for the wrong fast track. He must hope independent voters don't notice.

Colombian President Juan Manuel Santos met today with President Obama at the White House to end an impasse blocking adoption of a trade agreement first concluded in November of 2006. The Colombian government has agreed to rewrite parts of their labor law to U.S. specifications.

The resolution came after mounting calls for movement from Capitol Hill. House Republicans had been particularly vocal about the need to advance the pending Colombia and Panama agreements alongside the South Korean accord after years of delay. Of late, though, the calls had grown bipartisan. On Monday, Senate Finance Committee Chairman Max Baucus (D-MT) and Senate Foreign Relations Committee Chairman John Kerry (D-MA) published a joint op-ed in the Wall Street Journal describing the Colombia pact as an important spur to employment:

Each day we fail to act costs American jobs and sales-and sends them elsewhere.

So, 1,091 days after the Bush administration submitted the Colombia FTA to Congress, the Obama administration has found a path to move forward. The plaudits for this move have been rolling in since it was announced yesterday. Not only does the Colombia FTA offer its own array of benefits, but the move has the potential to unblock U.S. trade policy more broadly. To lever the administration into action on the pending FTAs, Republicans had linked the passage of the Korean FTA, renewal of trade adjustment assistance programs, trade preference programs, and even confirmation of a new commerce secretary. It is not clear that all of the timing issues have been worked out between House Republicans and the White House, but the agreement with Colombia significantly enhances prospects for movement on a trade agenda this summer.

Lest there be excessive rejoicing, though, it is worth keeping in mind that passage of the three agreements would partially complete the trade agenda of 2007, and there was a cost to the dithering. The pending FTAs offered benefits in two important dimensions: access to the markets for American exporters and stronger diplomatic ties. On the economic front, this access was originally set to grant American businesses and farmers preferential access to the Korean and Colombian markets, ahead of global competitors. Now, there is a scramble just to keep U.S. exporters on an even footing. While the agreements were stymied by domestic political fights in the United States, our partner countries reached other agreements to open their markets to the world. A prime motivation for the mid-summer deadline on passing the Korea-U.S. FTA is the looming passage into force of Korea's FTA with the European Union.

On the diplomatic front, the FTAs were meant to send a signal of friendship and allegiance. While the partner countries certainly welcome passage now, that signal has been somewhat diminished by years of slapping them around through public criticism.

There is a pending, post-2007 trade agenda out there. The eternal but deeply-troubled global trade talks (the Doha Round) are in desperate need of American leadership. The WTO's director-general, Pascal Lamy, sounded the alarm to members last week:

Now is the time for all of you, and in particular those among you who bear the largest responsibility in the system, to reflect on the consequences of failure ... to think about the consequences of the non-Round to the multilateral trading system which we have so patiently built over the last 70 years. It is the time to think hard about multilateralism, which your leaders, yourselves and myself preach at every occasion. In politics, as in life, there is always a moment when intentions and reality face the test of truth. We are nearly there today.

Then there are the Bush-launched, Obama-embraced talks to expand the Trans-Pacific Partnership (TPP). A number of the participants in those talks are earnestly shooting for a conclusion this November, when the United States hosts the APEC meetings in Hawaii. This seems implausible, since the administration has not yet broached the question of trade negotiating authority for those talks with the Congress. And if labor and human rights issues with Colombia stirred controversy, wait until we start discussing Vietnam, a TPP participant.

The biggest question surrounding this week's breakthrough on the Colombia FTA is where it leaves relations between the White House and the American labor movement, which has been the most outspoken opponent of recent trade agreements. The administration made some inroads with labor through its reworking of the Korea-U.S. FTA at the end of last year. That won the support of the United Auto Workers, though that support did not extend beyond Korea. The AFL-CIO has remained opposed to all of the pending FTAs. Yesterday, it released a statement:

We are deeply disappointed that the Obama administration has signaled that it will move forward to submit the proposed U.S.-Colombia Trade Agreement to Congress for a vote in the near future ... on the basis of the information provided to us at this time, we remain strongly opposed to the Colombia trade agreement.

It remains to be seen whether this opposition will be vigorous or muted. The Obama administration will also need to decide whether, on trade issues, it has now cast its lot with a coalition of pro-trade Republicans and internationalist Democrats, or whether it has pushed its labor allies as far as it dares.

Those are questions for another day, though. Today, Presidents Obama and Santos had cause to celebrate.

WILL INBODEN

As the end of the year approaches, along with it comes the ritual end of year evaluations as well as New Year's resolutions. In that spirit, several Shadow Government contributors here offer our thoughts on the Obama administration's foreign policies -- specifically:

1. Advice for the administration in the new year,

2. Suggestions on what policies are working and should be continued, and

3. Suggestions on what policies aren't working and should be consigned to the archives.

Advice: Seize the initiative. This is not about a specific policy but an overall posture. Two years since President Obama's election, the question of an "Obama Doctrine" remains elusive, as the administration's national security policy has mostly been reactive, focused on managing current challenges and crises. This inbox by itself is a substantial challenge to be sure, and one which the administration is handling with varying degrees of success (e.g. decently well with Iran and North Korea, with mixed results with Afghanistan and Iraq, and less well with Pakistan and Israel/Palestinian issues). Missing thus far, however, has been an overarching strategic framework. Hence my advice that the White House seize the initiative for its next two years, and develop a strategic doctrine or at least proactively take advantage of creating some new foreign policy opportunities. Implications for seizing the initiative include:

• Don't acquiesce in predictions of U.S. decline. The world needs responsible global leadership, and there remains no better candidate than the United States.
• Establish principles, alliances, and institutions that will endure beyond this presidency.
• Take the long view. Ignore annual global popularity surveys, and instead ask a question that President Bush told us to consider while on his NSC staff: "What policies should I adopt now as president that my successor's successor will look back on with gratitude?"

What might seizing the initiative look like in practice? For specific policy ideas, perhaps a new alliance of democracies in Asia, or a new global free trade initiative, or reinvigorated transatlantic partnerships, or a new strategic outreach in a neglected region such as Latin America or Africa (including an American partnership with the likely new state in southern Sudan, as Andrew Natsios has suggested), or establishing a robust strategic framework for winning the war of ideas against jihadist ideology.

Continue: Rediscovery of the freedom agenda. After its initial woeful neglect of democracy and human rights promotion, earlier this year the Obama administration rediscovered -- rhetorically at least -- the importance of supporting freedom around the world. The White House should build on this, particularly with specific policies and with new resources. As events in just the past few weeks have shown, in places like Belarus, Cote d'Ivoire, Egypt, and China, the demands of citizens for their liberty remain embattled and in need of America support.

Drop: The "reset" with Russia. Now that New START has passed the Senate, and thus completes the centerpiece of the administration's "reset" policy, it is time for a new, realistic look at Russia -- which necessarily means a delete of the reset framework. The original reset framework assumed that U.S.-Russia relations could be put on a sustained positive trajectory based on shared interests and reciprocal good will. But as Bob Kagan wrote earlier this week, "relations with Moscow are about to grow more challenging," as serious issues including Russia's ongoing occupation of Georgia, growing corruption and internal repression, and cynical ambivalence on Iran remain. Defense Secretary Robert Gates's reported description of Russia got it right: "An oligarchy run by the security services." Taking a fresh look at the United States' Russia policy should include strengthening U.S. support for beleaguered Russian reformers, reaffirming U.S. commitments to our allies and partners in Russia's border regions, and jettisoning unrealistic assumptions about shared interests. Ironically, such a reduction in expectations might well enable better cooperation in the areas where our interests do align.

PETER FEAVER

Advice: Be as committed to seeing Iraq and Afghanistan through to success as the President was in pursuing health care "reform." President Obama secured his place in history with the passage of Obamacare. Whether it comes to be seen as a positive legacy like Social Security, or as an overreach and folly like Prohibition, it will always be seen as historic and as the president's own. This was a policy war of choice, not of necessity. There were needful aspects of health care reform, but most of them fell out of the bill or got swamped by far more expensive and consequential optional items. Elections have consequences, and in this case it empowered Obama to doggedly pursue what he considered to be the right thing -- and he showed he was willing to pay a huge electoral price, if necessary.

It is time for him to engage in a policy war of necessity, building a political coalition in support of prevailing in Iraq and Afghanistan. His policy moves in the next two years will likely prove decisive in determining whether U.S. forces leave in success or defeat. Until now, President Obama has not made war leadership a central priority of his administration, and he has devoted very little effort at all to the crucial task of mobilizing political/public support. It is time, past time, to devote the political capital to this effort.

Continue: President Obama and his team proved quite adept in passing New START. To be sure the treaty itself was only of secondary importance for national security. Indeed, the side deals on force modernization and missile defense wrung out of the administration by skeptical senators will likely prove far more consequential in the long run than the modest treaty provisions. Yet the orchestration of lobbying, arm-twisting, bipartisan outreaching, principled deal-making, and even somewhat hyperbolic policy-shilling -- all of that amounted to an impressive effort culminating in what surely is the administration's greatest national security accomplishment to date. If the administration devotes a similar effort to forging bipartisan support for the various wars under its command (see point above), it will be an even more impressive national security accomplishment.

Drop: The silly campaign boasting that "America is back" in Asia. The boast was always a bit absurd but it quickly became an embarrassment when President Obama and Secretary of State Hillary Clinton had to skip regional meetings and postpone long-planned trips to attend to domestic political priorities. The boast also reflected a needless defensiveness on the administration's part. The United States has pursued a common bipartisan grand strategy in Asia for over a decade now, with President George W. Bush building on President Bill Clinton's initial efforts regarding China, India, and Japan, and now President Obama building on Bush's initiatives. Rather than pretend to be offering a bold departure, why not make a virtue out of the truth and note that there are some areas where mainstream Democrats and mainstream Republicans can agree, and one of them is Asia? Both sides recognize that the United States is an Asia-Pacific power and the world will be a better place if the United States remains vitally engaged in this region. No need to pretend that the United States ever left, because it didn't and it won't.

PHIL LEVY

Advice: From a trade perspective, it is remarkable to think how little has been accomplished in the first two years of the Obama presidency. When he took office, President Obama inherited an agenda that included stalled global trade talks (the Doha round of World Trade Organization negotiations), three already-negotiated free trade agreements (South Korea, Colombia, and Panama), and a troubled trade relationship with China. Across all of these items, the only achievement approaching progress was the revision to the Korean free trade agreement, and that came at the very end of 2010. The revision left Ford and the United Auto Workers happier, but came at the expense of other sectors, such as pork producers.

Better late than never, but there were costs to the lost time. Free trade agreements that promised U.S. producers at least a period of privileged access to a trading partner's market are now just offering the prospect of equal access, since our jilted partners went and negotiated agreements with other countries while the United States dallied. Frustration was already high with the lagging global trade talks; it has since mounted. What's more, the repeated empty promises of the G-20 nations to conclude the Doha round undermined that group's credibility.

The ineffectiveness of the G-20 was also revealed in the sad Seoul summit, in which China and Germany objected to any global rebalancing plan that pushed past platitudes. The Obama administration -- Treasury Secretary Timothy Geithner in particular -- deserves credit for putting forth a credible approach; it just didn't seem to gain traction. As with trade liberalization, the administration might have been more credible had it led by example. In trade, it called for a new WTO agreement while condoning "Buy America" protectionism and showing that it would not spend the political capital to push through existing agreements. In international finance, it called for global rebalancing while dramatically increasing spending, creating a significant new entitlement program through its health care plans, and relegating any plans for fiscal restraint to a separate deficit commission (as opposed to using its own Office of Management and Budget).

So what happens when you defer serious action on the international economic front for a couple of years? Institutions (in this case the WTO) deteriorate, problems (resurgent global imbalances) fester and grow, and resolutions to address these issues soon may be undercut by new crises that demand attention.

Looking ahead to the rest of Obama's term, my top candidate for major distracting crisis to come is the bubbling debt trouble in Europe. The leaders of the Euro nations have been working furiously to address problems as they pop up in Greece, then Ireland, then Portugal, with Spain and Belgium starting to simmer. But all of their remedies have done little more than buy time and, in some cases, allow the problems to grow. There are fundamental inconsistencies ripping the euro apart. When that happens, it will not simply be a matter of having to deal with currency exchange at the borders; it will likely involve a significant banking crisis. Those, it turns out, can be nasty.

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The president's Asia trip is getting mixed reviews, wildly mixed reviews.

Team Obama thought the trip was a huge success. Tom Donilon, the new National Security Advisor, in a fit of extraordinary (jet-lagged?) exuberance told reporters in Yokohama: "I think when historians look back on the trip to India and Indonesia. It will be one of those seminal moments, one of those iconic moments in the relationship between countries when historians look back on it."

Outside observers were less charitable. Some dismissed it as "a trip about nothing." Even charter members of the Obama choir fretted about the optics of the President scurrying out of town so soon after the electoral "shellacking."

The truth is somewhere in the middle. The president made some modest headway, with a solid but not stellar visit to India and a fine visit to Indonesia. It was hardly "iconic," but the visit to Indonesia may have been "seminal." The Obama administration believes they have a real opportunity in Indonesia thanks to the president's personal connection to the country. If they were able to build the foundation of a strategic partnership with Indonesia as Presidents Clinton and Bush were able to do with India, that would indeed be an accomplishment. But they have a long way to go and they clearly had no significant deliverables for this visit.

The rest of the trip went considerably less well. I was inclined to give Team Obama a pass over the failure to close the deal on the Korea-US Free Trade Agreement (KORUS) because I remember how frustrating the Bush Team found negotiating with our allies in Seoul could be. Then I read Phil Levy's blistering analysis and had second thoughts. He makes a convincing case that this was diplomatic malpractice, from the arrogant dismissal of the deal they inherited, to the boastful claim that the deal would be struck on this trip, to the endgame when the staff sent President Obama out to face the cameras with nothing to show for two years of haggling.

Levy leaves unasked the obvious follow-up question that most interests me about this episode: How could the staff leave the president exposed on this fiasco? There may have been errors at the middle-staff level, but my own read is that the point people who owned the issue -- Treasury Under Secretary Lael Brainard and Deputy National Security Advisor for International Economic Affairs (and economic summit "sherpa") Michael Froman -- were not to blame. In fact, were they to blame that would surprise me because they are some of the strongest players on Obama's team. On an issue such as this one, the hardest deals to cut are the ones within one's own team, in particular the deals between the foreign policy and the domestic politics folks. There are only a handful of people who have the heft to force such deals: a strong National Security Advisor, a strong National Economic Council Director, a bold senior political advisor, and the chief of staff, in other words Tom Donilon, Larry Summers, David Axelrod, and Pete Rouse. If those four were not able to forge a deal they could live with that the Koreans would accept -- and manifestly they were not -- then there is only one person who could have, President Obama himself.

Yes, the Koreans deserve some blame for driving such a hard bargain, but they were just exploiting the mistakes of the administration: the mistake of setting the deadline, which weakened our bargaining position; the mistake of not getting the deal done before Air Force One left Washington; and the mistake of not securing (or merely taking) more bargaining space from domestic coalitions. Once the jet lag wears off, I hope the Obama Team will sort this one out.

While U.S. voters were not particularly interested in foreign policy (certainly not Asia policy) during this election, Asia is always interested in U.S. voters. The economic growth of countries such as China and India, and the technological and innovative dynamism of much of the rest of Asia, are significantly impacting the structure of the U.S. economy. Newly elected Republicans have a chance to help the United States continue to benefit from Asia's growing prosperity.

Though the election was not about foreign policy, it is worth noting that former Vice President Dick Cheney's early 2009 critique of Obama's counter-terrorism policies first exposed the chinks in the administration's armor, demonstrating signs of life for a Republican Party declared dead and providing moral support to others in his party who soon voiced their own powerful critiques. Still, this election was about economics and the size and structure of government, not foreign policy. So, I am about to practice economics and politics without a license.

While voters still do not seem to trust the GOP, the party can regain their trust by reclaiming the mantle of economic leadership. Newly-elected Republicans can insist upon free market, pro-free trade policies that can push the president to create a friendlier climate for foreign investment in the United States as well as to ratify a free trade deal with South Korea and pry open other Asian markets for U.S. investment and exports.

By committing to fiscal responsibility, Republicans can provide a more credible case for the global rebalancing that economists agree needs to happen. A collective economic rebalancing, rather than a trade war or legislating punitive tariffs, is the answer to our current economic troubles with China. And a broader commitment to U.S. leadership in trade liberalization throughout Asia will contribute to setting the United States back on the road to economic growth and low unemployment.

But the United States is on the horns of a dilemma in Asia, one that new Republican leaders must resolve. Our huge debt and uncertain fiscal position calls into question our ability to sustain a robust diplomatic and military presence in the region; if fiscal austerity includes cuts to the defense budget, Asians will continue to conclude that we are not going to be present in Asia for the long haul. In the context of Asia policy, then, the key challenge for Republican leaders both in Congress and aspiring to the presidency is to strike the right balance between pursuing long-term measures to restore fiscal health without making short-term cuts on defense spending that create deep regional unease.

The first chance for Republicans to reconcile long and short term goals with respect to Asia is during Obama's trip to the region. They should pledge to work with him if he agrees to ratify the FTA with Korea, hold his feet to the fire if he panders to special interests on the issue of outsourcing to India (or what I like to call trading based on comparative advantage), and pledge to support him if he commits to keeping our alliances strong by making the military investments we need to keep the region stable.

Within a week of suffering the biggest midterm drubbing in generations, President Barack Obama will depart on a trip to India, Indonesia, Japan and Korea. How the president handles this trip will speak volumes about how he sees his agenda for the next two years and how much of an international president he really is.

The first test will be whether he takes the trip at all. Democratic Party strategists and other influential pundits have already begun questioning why he would go abroad and let Republicans seize the narrative at the most crucial point in his presidency. On CNN, former advisor to President Bill Clinton, David Gergen, warned the White House against making the same mistake Clinton made when he went abroad in the wake of Republican midterm victories in November 1994. Will they cancel? The president has already put off previously scheduled trips to India and Indonesia because of domestic political developments. On the other hand, the White House likes to claim this is the first "Pacific president," because Obama grew up in Indonesia and Hawaii (though other presidents like William Howard Taft and John F. Kennedy had plenty of experience in the Pacific as well, of course), and that the United States is "back" in Asia (though commentators across the region are asking when the United States ever left). All of this spin -- the first "Pacific president" and the "we're back in Asia" mantra -- would go flying out the window if the president cancelled his trip. Clinton was right not to cancel his international travel in 1994 -- it would have made the presidency appear even weaker. That would have been disastrous politics and worse geostrategy. So odds are pretty good that the president will go on the trip (fingers crossed).

The next test will be how the president handles ten days of hounding from the press about electoral defeats while he is in Asia. And the press will hound -- no doubt about it. Maybe if North Korea fires artillery across the DMZ during the G-20 summit in Seoul or China attacks the Senkaku Islands while the president is in Japan, the press corps might be distracted from domestic U.S. politics to focus briefly on international events. Or maybe the president will dig deep into his oratorical tool box to help shift the media's focus to U.S. interests in Asia -- the continent projected to contribute 60 percent of global GDP in our lifetime. He will have real occasion to look presidential again if he avoids the trivia of fact sheets and joint statements and presents a vision for international U.S. leadership. The visit to Indonesia -- the world's largest Muslim nation and one that proves Islam and democracy coexist-- could be a moment for articulating a real message about the compatibility of democratic values and Muslim faith. The Asia Pacific Economic Cooperation (APEC) summit in Yokohama would be the place to remind Americans that over 50 percent of our trade is with this dynamic region, and that the United States can and must compete. The stops in India, Japan and Korea would be the right settings for explaining why investing in our strategic partnerships and alliances will pay dividends in terms of tackling the challenges we face internationally. The president must not re-fight the midterm, appear defensive, or make the narrative about himself (the last of these being the default narrative of the White House on foreign trips thus far). He must ignore what John McCain would call the "ground noise" and talk about the United States and Asia. The press might just listen. The region certainly will.

The third test will be on trade. If there is one area where the White House should be able to work with a more Republican Congress, it is on trade. And if there is one policy area Asia is watching to see if Washington is committed, it's trade. The president has said that he wants the United States-Korea Free Trade Agreement (KORUS) ready to present to Congress (again) by the end of the year, but the administration has done no heavy lifting to get to that point (all the action has been aimed at pressing the Koreans to make further compromises). Fair enough -- there were elections coming up, and it may have been unrealistic to expect a Democratic White House to take on its labor union base when turnout was so critical to their electoral strategy. This trip is the time to demonstrate not only the hope that KORUS will be introduced this year, but the intention to do so in partnership with Republicans willing to work for its passage. It would set a tone that Asia would welcome and that Americans desiring more bipartisanship in Washington would be thankful for.

The president's Asia trip should not be seen by the White House as an unfortunate distraction, but instead as a real test of presidential leadership -- one that will help the president and the country if he approaches it the right way.

What was the administration trying to achieve by sending Larry Summers to Beijing? What message was it trying to convey? And was the intended audience American or Chinese?

Taken at face value, Dr. Summers, as head of the National Economic Council, was there to deliver a message about American economic concerns. Foremost among these has been the stubborn stasis in China's exchange rate against the dollar. If this was the real purpose of his trip, he achieved little; the Chinese did not even pretend to accommodate. According to the Wall Street Journal:

Chinese officials have consistently said that they won't change key economic policies because of foreign pressure, and argued that the exchange rate has little bearing on the U.S. trade imbalance with China. "Our exchange rate reform can't be pressed ahead under external pressure," Foreign Ministry spokeswoman Jiang Yu said at a regular press briefing Tuesday.

If Dr. Summers' mission was to describe mounting political pressure in Washington, it is not clear what he could have said that would have surprised his hosts. The Chinese have certainly already heard of Sen. Schumer (D-NY) and they have undoubtedly read the Ryan-Murphy bill in the House.

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The signing by Taiwan and China of the Economic Cooperation Framework Agreement is a welcome development. The agreement cuts tariffs on 539 Taiwanese products bound for China and 267 Chinese products exported to Taiwan. The cuts on the Taiwan items are valued at $13.84 billion and those from China $2.86 billion.

Economically, Taiwan, the PRC, and the United States will all benefit. Politically, the agreement means a reduction in tension across the Strait, and it provides incentives for Chinese restraint (it is easy to forget that interdependence works both ways -- Taiwan may rely on China for final assembly and low-end manufacturing, but China is dependent upon Taiwan's investment and managerial know-how).

However, Washington should not be lulled into complacency -- the cross Strait problem has not disappeared. With over a thousand missiles pointed at it, Taiwan faces Chinese coercion every day: All of Taipei's negotiations, including those over the ECFA, are conducted with the equivalent of a gun pointed at its head. We should view the ECFA as only the first step in a series of measures that will strengthen Taiwan, stabilize the Strait, and liberalize trade in Asia.

Next up, we should sell Taiwan the additional F-16 aircraft it has requested, which it needs in order to counter China's daunting threat to the island's airspace. An F-16 sale would demonstrate America's abiding commitment to Taiwan's security and strengthen the hand of Taiwan's President Ma Ying-jeou as he continues to negotiate stability in the Strait. Would Beijing raise a stink? Of course. But it has no leg to stand on. Taiwan already has F-16s and simply needs more to replace the numerous aging aircraft in its fleet. Moreover, it is China that has decided to negotiate and threaten at the same time. In response, Taiwan needs to simultaneously negotiate and deter. Finally, the cost to Washington would be low: Beijing has already thrown its quarterly temper tantrum by cutting off bilateral military talks and prohibiting Secretary of Defense Robert Gates from visiting China.

Beyond arms sales, the United States can help Taiwan become the place to do business in Asia, a move that would benefit both Washington and Taipei. Taiwan has already liberalized its trading relationship with China, its high-end manufacturing and design capabilities are world class, and its businesses succeed in the China market where many others fail. Washington should negotiate a free trade agreement with Taiwan for three reasons. First, an FTA with Taiwan will provide  economic benefits to both sides. Second, now that Taiwan has liberalized trade with China, U.S. businesses can use Taiwan as a launching pad to succeed in the China market. Third, other Asian economies will only move forward with their own FTAs with Taiwan -- necessary for both Taiwan's security and its future prosperity -- if Washington provides political cover.

With some help from Washington, Taiwan could make itself into the region's business hub. If Taiwan becomes Asia's economic nerve center, its security will improve immeasurably.

Does China control the fate of the U.S. labor market? Fred Bergsten, the distinguished director of the Peterson Institute for International Economics, writes that persuading China to boost the value of its currency would be "by far the most cost-effective possible step to reduce the unemployment rate and help speed economic recovery" in the United States.

He claims that "such a trade correction would generate an additional 600,000 to 1.2 million jobs." In this claim he actually underbids competitors such as Paul Krugman (1.4 million jobs) of the New York Times and Rob Scott (2.4 million) of the Economic Policy Institute. Praiseworthy as Bergsten's moderation may be, how does one get a number like his?

Here is his chain of assumptions:

• China will revalue its currency significantly. Bergsten estimates that the renminbi is undervalued by about 40 percent against the U.S. dollar.
• Chinese revaluation will cut the U.S. trade deficit (i.e., increase exports relative to imports).
• Cutting the U.S. trade deficit will bring American jobs.

Every single link in this chain is weak. Let's take them in turn.

Weak link No. 1: While estimates may vary about how much China ought to revalue, there is less quibbling about how much China is likely to revalue. I agree with Gary Hufbauer, also of the Peterson Institute, who writes:

The period between July 2005 and July 2008, when China temporarily abandoned its peg to the U.S. dollar, suggests the maximum extent and pace the Chinese might allow the yuan to appreciate. During that period, the yuan increased 20.15 percent against the dollar; on a per month basis the average increase was 0.52 percent."

So the most likely outcome is a modest appreciation of the renminbi. But even if the United States could compel a 40 percent overnight appreciation, China would be left reeling from the magnitude of the economic shock. It would be unlikely to turn into a vibrant source of demand for Western goods.

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