China

By Phil Levy

In Tokyo, President Obama spoke out in favor of trade. It was not exactly the much-heralded Trade Speech, in which he would lay out a detailed agenda and soothe U.S. public fears that he himself had helped to arouse. Instead, this talk was addressed to an Asian audience, but it offered some tantalizing new details and a near embrace of some free trade agreements. The President said:

Continued integration of the economies of this region will benefit workers, consumers, and businesses in all of our nations. Together, with our South Korean friends, we will work through the issues necessary to move forward on a trade agreement with them. The United States will also be engaging with the Trans Pacific partnership countries with the goal of shaping a regional agreement that will have broad-based membership and the high standards worthy of a 21st century trade agreement.

Rather than drawing inspiration from the president's oratory, as U.S. and European audiences often had, Asian leaders greeted the president's trade stance with skepticism. As the Financial Times reported:

Lee Kuan Yew, Singapore's first prime minister and a regional elder statesman, said the US risked economic exclusion from Asia unless it reversed its protectionist stance. ...

Najib Razak, Malaysia's prime minister, ... told the Asia Pacific Economic Cooperation summit in Singapore that progress on trade liberalisation was "imperative" for global recovery. "The thing I liked about President Bush's foreign policy is that he was very pro-free trade. I hope the same message will be repeated."

- some evidence that the Bush administration did not entirely neglect Asia for eight years.

One might have expected Obama's vague statements in favor of the Doha trade talks, moving forward with South Korea, and engaging with the mysterious Trans Pacific Partnership to have at least created a warm glow about U.S. sentiments. After all, similarly vague statements about avoiding protectionism and supporting the WTO garnered kudos at G-20 summits in London and Pittsburgh earlier this year.

Whether the APEC leaders were more discriminating than other audiences, cared more about trade, were more astute in their reading of American trade politics, or had just learned from past experience, they seemed unsatisfied. Perhaps with recent disputes fresh in their minds, they seemed to ask, "where's the beef?" And they were right to worry.

The global trading system has not been lacking in kindly thoughts and well wishes. It's been lacking in strong leadership and specific proposals. Fingers have been pointing at the Obama administration. The Doha global trade talks that were declared essential in the G-20 sessions have been foundering. Last month, the European Union and Brazil criticized the United States for failing to put forward specific demands. This month, WTO Director General Pascal Lamy commented that "the U.S. is proving to be slow in reaching a clear and articulated negotiating position." If it were translated from the excessively cordial language of international diplomacy, that remark would likely be unprintable in a family publication.

Ostensibly, the Korean FTA is unacceptable to President Obama and Congressional Democrats because the Koreans have had the audacity to intervene in their auto market. Korea, as a major trading nation, has not been as pliable as other U.S. FTA partners and has made clear in the past that they are not interested in renegotiating the agreement with the United States. Instead, Korea has just concluded a similar agreement with the European Union that will put American exporters at a disadvantage in the Korean market.

The novelty in the president's announcement concerned the Trans Pacific Partnership (TPP) and was sufficiently obscure to leave many people scratching their heads. In fact, the United States had already joined TPP talks with Brunei, Chile, New Zealand, and Singapore late in 2008 under President Bush's direction. Obama's announcement in Tokyo seemed to indicate a lifting of his administration's suspension decision from earlier this year: small wonder that it received a tepid response. Even had the President wholeheartedly embraced a TPP deal, that would not have meant much on its own, since the United States already has FTAs with Chile and Singapore. Brunei's entire annual GDP is roughly $20 billion, which is less than the U.S. government has poured into Citigroup.

The reason to care about the TPP was its potential to serve as a platform for serious integration throughout Asia. For a region that places a high value on trade, the Asia-Pacific has had a great deal of difficulty finding the right path toward liberalization. APEC has made trade pledges in the past, but the group has a very diverse membership and likely cannot serve as the vehicle for a high-standards regional FTA. More promising was the idea that if Australia and Japan were coaxed into joining a sophisticated TPP, the resulting FTA might then have opened its doors to any other Pacific nation willing to accept its terms. Unfortunately, the Obama administration has given no indication that it's willing to lead such an ambitious undertaking

A prerequisite for a serious U.S. trade policy would be new trade negotiating authority for the president, which the Obama administration has not even requested from the Congress. For any of these trade initiatives to advance would require persistent and detailed effort of a sort we have yet to see. Obama may be a Pacific president, but he has not been a very specific president. Asian leaders last week were asking for more than platitudes.

MANDEL NGAN/AFP/Getty Images

By Daniel Blumenthal

Before President Obama and Chinese President Hu Jintao released their joint statement, Obama's Asia trip was underwhelming. But after the statement, Obama's foray into Asia went from empty to harmful.

Before Obama arrived in China, the trip's policy successes were minimal at best. He showed up to a major trade forum, APEC, with no trade policy. If, as Evan Feigenbaum has said, the "business of Asia is business," without a trade policy Obama is putting America out of business in the world's most economically dynamic region. And then he was stiffed by Japanese Prime Minister Hatoyama's outright rejection of the American proposal for a high-level dialogue to resolve basing issues on Okinawa. Not exactly a sterling performance by the new team.

But then came the joint statement after talks with President Hu. Two items in the statement struck me: one about Taiwan, the other in regard to India.

On Taiwan, the statement says:

The two countries reiterated that the fundamental principle of respect for each other's sovereignty and territorial integrity is at the core of the three U.S.-China joint communiqués which guide U.S.-China relations. Neither side supports any attempts by any force to undermine this principle. The two sides agreed that respecting each other's core interests is extremely important to ensure steady progress in U.S.-China relations.

The three communiqués do indeed mention respect for territorial integrity. But it is highly arguable that "respect for ... sovereignty and territorial integrity" represent the "core" of the understandings that led to Sino-American rapprochement. The Taiwan issue was treated more delicately by earlier American statesmen. Their basic idea was that we would acknowledge, without accepting, the position that Taiwan is part of China. We would continue strong, unofficial diplomatic ties with the island and we would provide for its security through the Taiwan Relations Act (TRA). We thus found a way to normalize relations with China without letting China have its way with Taiwan. Both sides of the Strait have prospered since the U.S. rapprochement with China and the signing into law of the TRA and relations have been more or less peaceful.

Now consider the situation across the Strait today. China has built a military capable of destroying the island if America does not assist Taiwan. Though obligated by law, the Obama administration has not sold a single weapon system to Taiwan. There is in fact no U.S.-Taiwan agenda under the Obama administration. It is even more dangerous, then, to stress the parts of the Sino-American normalization documents that most appeal to China. Of course China wants us to reiterate that our respect for "territorial integrity" and "sovereignty" is at the core of the three communiqués. Beijing wants us to accept its argument that Taiwan is part of China and that we should respect their sovereignty over the island. Obama has thus far done so through deed. With the joint statement he comes closer to officially accepting the Chinese claim of sovereignty.

On India, the joint statement says: 

The two sides welcomed all efforts conducive to peace, stability and development in South Asia. They support the efforts of Afghanistan and Pakistan to fight terrorism, maintain domestic stability and achieve sustainable economic and social development, and support the improvement and growth of relations between India and Pakistan. The two sides are ready to strengthen communication, dialogue and cooperation on issues related to South Asia and work together to promote peace, stability and development in that region.

Here, President Obama broke new ground in ways harmful to both American and Indian interests. India and Japan are the two countries within Asia that can check China's desired dominance. For now, China has less to worry about with Japan as the Hatayoma government sorts through its foreign policies. But India is a different matter. It stood firm against China's pressure when the Dalai Lama visited Arunachal Pradesh, an Indian territory claimed by China. Delhi was sending two messages. First, do not interfere in India's internal affairs; the Dalai Lama is free to visit anywhere in India. Second, Arunachal Pradesh is India's territory. China had been putting military pressure on the border region but the Indians did not back down. Delhi is also standing firm in its maritime competition with China in the Indian Ocean. The Indian Navy will not allow China to build a sphere of influence in that maritime region.

Beijing's India strategy is to tie it down in South Asia to stop it from breaking out as a major power. The strategy has three basic pillars. First, Beijing has supported Pakistan's nuclear and conventional military programs. Second, China wants an acknowledged sphere of influence in South Asia. And third, Beijing wants to resurrect the so called "hyphenated" approach to India. It thus needs the United States to again think of India as part of an India-Pakistan problem, rather than as an emerging great power.

During the Bush and Clinton administrations, Delhi and Washington negotiated an arrangement that acknowledged Delhi's global role and increasing influence. This arrangement is of mutual benefit. Pakistan matters less to India as Delhi expands its strategic horizons. As Pakistan's importance to India lessons, so will Indian-Pakistani tensions. But as India frees itself from the weight of its Pakistan problem it has greater maneuverability to increase its influence in East Asia. China is threatened by that.

Thus, China won a diplomatic victory by getting Washington to agree to "cooperate" on issues of peace and development in South Asia. If China and America work together on South Asian issues, such as peace between India and Pakistan, then China is the great power while India is simply another South Asian country that needs help from others to solve its problems. With the joint statement, Obama officially accorded India junior status in Asia.

We should not be surprised by China's positions. What is surprising -- and extremely problematic -- is that on these key issues Obama is acquiescing in them.

FREDERIC J. BROWN/AFP/Getty Images

By Thomas G. Mahnken

One topic that is likely to arise during President Obama's trip to Asia, if not in his meetings in Beijing, is the continuing modernization of the Chinese military. Asian leaders are privately, and increasingly publicly, concerned about China's growing military might and what they see as a failure of the United States to respond. This year's Australian defense white paper, for example, portrays a future in which China contests American primacy in Asia and beyond. When one of the United States' closest allies expresses such concerns, Washington should listen.

According to at least one high-ranking official, the United States has systematically underestimated the pace and scope of Chinese military modernization for years. On Oct. 21 in an interview with the Voice of America, the incoming Commander of U.S. Pacific Command (USPACOM), Admiral Robert F. Willard, USN, told reporters that, "In the past decade or so, China has exceeded most of our intelligence estimates of their military capability and capacity, every year. ... They've grown at an unprecedented rate in those capabilities. And, they've developed some asymmetric capabilities that are concerning to the region, some anti-access capabilities and so on." Willard should know. Prior to becoming the USPACOM commander, he was in command of all U.S. naval forces in the Pacific; before that, he was Vice Chief of Naval Operations.

Willard's observation should be cause for concern, but is not a surprise. Intelligence organizations have a tendency to underestimate rising powers. As I discuss in my book, Uncovering Ways of War, U.S. Army and Navy intelligence in the period between the two world wars underestimated the growth of the Japanese military power not because of racial bias or ethnocentrism, but rather because of the very real tendency to look back on Japan's modest military capabilities and project them into the future. As a result, American intelligence organizations overlooked a number of areas where the Japanese military innovated, failures that cost the United States and its allies dearly in World War II.

I suspect that the same pathologies may be at work today regarding China. The People's Liberation Army of the 1980s and 1990s was hardly first-rate. In recent years, however, China has made real strides, including the testing of an anti-satellite weapon in July 2007 and the development of an anti-ship ballistic missile designed to attack U.S. carrier strike groups. Outside a small circle of cognoscenti, however, perceptions of Chinese military power have failed to keep pace with this reality.

If we are in danger of underestimating Chinese military power, China's leaders are in danger of overestimating it. Some portions of the Chinese military have not seen action since China's 1979 war with Vietnam; others have not seen combat since the Korean War. Although China is in the process of fielding increasingly capable weapons, the military effectiveness of the PLA is very much an open question.

The United States needs to do more to understand the Chinese military. The PLA intently studies the U.S. military; the U.S. military lacks a similar curiosity about them. That needs to change. It would be worthwhile, for example, to translate and make available to scholars a broader array of Chinese writings about military affairs. In addition, the U.S. military needs to devote greater attention to understanding the Chinese military, as well as the strategic and operational challenges it poses. Doing so will not, as some assert, preordain conflict with China. To the contrary, a better understanding of the Chinese military should help us avoid misperception and bolster deterrence. Such an effort should include our allies and friends in the region, who have their own perspectives and their own concerns with China's military expansion.

STR/AFP/Getty Images

By Michael Green

Surprises?

The biggest (most pleasant) surprise on Asia has been the Obama administration's willingness to use pressure on North Korea. After campaigning on a promise to meet with the leaders of nations like North Korea without conditions, the Obama White House has turned out to be quite hard line vis-à-vis Pyongyang.

Of course, it would be difficult to miss the obvious failure of Ambassador Chris Hill's conciliatory negotiating style at the end of the Bush administration -- let alone the fact that North Korea responded to President Obama's initial promises of engagement by detonating a second nuclear device. Still, in the case of North Korea the administration seems to have embraced the premise that there must be consequences for proliferators.

The administration has moved forward smartly with implementation of sanctions under U.N. Security Council Resolution 1874 (unlike the Bush administration's decision not to implement UNSCR 1718 after the first nuclear test) and thus far the Special Envoy for North Korea has refused to sit down with the North Koreans until they first agree to return to the Six Party Talks. Even the visit of former President Clinton to Pyongyang was done with most of the administration holding its nose and limiting the mission to the humanitarian goal of bringing home two American journalists taken by the North. We will see how long this holds, but for now the administration looks pretty tough.

Praiseworthy?

The Obama administration deserves praise for its selection of an Asia team. There were more than 60 "advisors" on Asia to the Obama campaign (close to the total number of advisors for the entire world working with McCain). Most of these advisors were calling for wholesale changes in Asia policy, echoing the usual canards about the Bush administration's "unilateralism" and "militarism." But in the end, the top jobs in NSC, State and Defense were filled by non-partisan centrists and pragmatists who recognized the successes of the Bush administration's Asia strategy and wanted to tweak rather than redefine the U.S. approach to the region. Better yet, the top officials at State, NSC and DOD are associated with the successes of the Clinton administration's Asia policy, including the revitalization of the U.S.-Japan alliance and the successful negotiations to bring China into the WTO. The team is professional, knowledgeable and very reassuring to the region.

Constructive Criticism?

The administration deserves criticism on two fronts. The complete lack of a trade strategy leaves the United States without any tools to counter the growth of exclusive regional economic arrangements within Asia. This will become obvious when Obama travels to the Asia Pacific Economic Cooperation (APEC) forum in two weeks and calls for an open and inclusive architecture like his predecessors -- only his predecessors actually were bringing something to the table in terms of trade liberalizing agreements with Korea and other countries in the region. The second area of criticism would be the administration's willingness to pull punches on human rights and democracy. The president's decision not to meet the Dalai Lama in Washington in August (the first rebuff to the Tibetan Spiritual Leader by a U.S. President in recent memory) was particularly problematic.

Predictions?

The Obama administration will grow tired of China. Obama expanded the Bush administration's Strategic Economic Dialogue into a Strategic and Economic Dialogue and raised expectations of progress with Beijing on everything from climate change to Iran and North Korea. But in the wake of the financial crisis Beijing sees itself as externally stronger and internally more vulnerable. That is not a recipe for more cooperation with Washington. Chinese support for North Korea's economy is increasing in the wake of Pyongyang's nuclear test and China will be relying on coal for 80 percent of its energy no matter how well discussions of climate change cooperation go (and they are not going that well). Then there is the unyielding PLA position on the South China Sea, cyber-security and a host of other security problems that will vex the Obama administration's China policy over the coming years. Usually, new administrations come into power in Washington having talked themselves into a tense relationship with Beijing during the election campaign and then they adjust to a more centrist and stable relationship with China (true of Regan, Carter, Clinton and G.W. Bush). The Obama administration came in without having engaged in a contentious debate over China policy with McCain, but may now find itself under increasing pressure to be tough with Beijing.

Photo by Korean Central Television/Yonhap via Getty Images

By Dan Blumenthal

Overall, Obama's Asia policy has been largely driven by events and domestic priorities rather than by an overarching strategic vision. The Obama team had to closely coordinate with China on financial matters in response to the financial crisis. Passing a cap and trade bill at home means that we need China to sign up to a global climate change pact; Americans will chafe at a costly bill if the world's largest carbon emitters do not agree to carbon reductions.

The Obama team attempted a new policy on Burma. The idea is to find a way to engage the military junta which would strengthen relations with the Association of Southeast Asian Nations, of which Burma is a member. But the policy change has been overtaken by events.

Aung San Suu Kyi was unfairly punished when an American swam across a lake to her residence. And the junta began a new round of repression, as its leaders jail and harass political opponents in the run up to their 2010 "elections." Obama could not radically shift Burma policy. Rather, adjustments to our relations with ASEAN and Burma have been only marginal. There has been some more contact with the junta. And as part of the broader attempt to build stronger relations with Southeast Asia, the administration signed the Treaty of Amity and Cooperation (TAC). These and visits to Southeast Asia by Secretary Clinton and her deputy, Jim Steinberg, demonstrate a desire to deepen American engagement with that region. It is unlikely that engaging Burma or signing the TAC will increase America's regional influence.

Surprise?

There are several Obama Asia policies that have been surprising. On a positive note, the Obama team has given much greater attention to the Japan alliance than I had expected. Secretary Clinton's first stop in Asia was in Tokyo, which eased Japanese concerns that they were in for another round of "Japan passing." Since the Democratic Party of Japan took over last September, Obama officials have visited Japan frequently to get a sense of how to deal with a party that has never before governed. The Obama team should be commended for trying to find its way with this inexperienced and eclectic ruling coalition.

Constructive Criticism?

Other policies should give us pause. For example, Obama is sticking to his campaign promises on trade, which means we have no trade policy. The Korea-U.S. Free Trade Agreement has been collecting dust in the Congress. The rest of the region, however, is not standing still. China seems to sign a trade agreement a minute and South Korea is moving forward on an FTA with the EU. If this continues, not only will our economy be disadvantaged, but our regional leadership will also suffer. While the Obama administration has done a fine job showing up to Asian multilateral meetings, without new trade proposals it has shown up empty handed.

A second troubling policy is the absence of any agenda on Taiwan. The Obama team was effusive in its praise of President Ma when he was elected in March 2008 and they applaud his attempts to ease tensions with the Mainland. The Taiwan president is doing what he thinks Washington wants - easing cross Strait tensions. But there was an implicit bargain with Taiwan that we are not upholding. We were supposed to strengthen Ma's hand by strengthening our ties to Taiwan. The Obama team is not helping Ma.  We have not sold any arms to Taiwan even as China has continued its arms buildup across the Strait. And Obama has no plans of yet to deepen economic ties as Taiwan goes forward with a China FTA.

Third, the bluntness with which the team has downplayed China's miserable human rights record is an unfortunate break with past administrations' practices. Secretary Clinton announced that she would deemphasize human rights concerns on her first trip to China. This was followed by the president's refusal to meet with the Dalai Lama when the Tibetan spiritual leader was in Washington last month. The administration has also been silent on Uighur repression and will not meet with Uighur leader Rebiya Kadeer. It does not help either country for us to pretend that we are indifferent about Chinese respect for human rights, when in reality we have a huge stake in China's political liberalization.

Overall, despite a regular barrage of criticism by Candidate Obama directed at President Bush for his supposed neglect of Asia (never a fair criticism), the Obama team has not wowed the region with new ideas or lavished it with attention. During Bush's first year, his administration had offered the largest arms package ever to Taiwan, was well on its way to substantially upgrading ties with Japan, and was negotiating a diplomatic breakthrough with India of historical significance. Then-U.S. Trade Representative Bob Zoellick was negotiating free trade agreements with Singapore, Australia, and Korea.

The criticism of the Bush administration was that it was "distracted" by the war on terror. The Obama team is learning that fighting a war saps a nation's energy and attention. Now in office, the Obama team can see that the threat from Islamic extremism is very real. The Obama team may have really believed that they could "fix" Afghanistan, disengage from Iraq, and then move on to "re-engaging" the rest of the world.

As Obama is learning, it is not so easy to "move on" when you are at war. No president can disconnect a major foreign policy issue such as war from other foreign policy issues. Asians have a stake in America's Afghanistan policy. A loss in Afghanistan would have stark consequences, as friend and foe alike would question our resolve, and Islamic extremism would rear its head again in Southeast Asia.

Prediction?

Obama's Asia team must be finding that during wartime, presidential attention is the scarcest of commodities. Obama has no choice but to focus on "the wars we are in," often at the expense of the Obama team's hopes for a grand "re-engagement" with Asia.

Win McNamee/Getty Images

By Phil Levy

Surprises?

I have been most surprised by President Obama's policy toward China. Trade with China was a major concern of labor groups in the election and then-Senator Obama signed pledges about the aggressive approach he would take. This included a commitment to find that China was a currency manipulator -- a stance reiterated by Treasury Secretary Geithner in his confirmation testimony. If anything, the facts shifted in favor of a currency finding against China: the exchange rate has not moved in over a year and the United States is borrowing less from abroad (suggesting less dependence).

Praiseworthy?

However, in April and October, the Obama Treasury repeated the finding of the Bush Treasury, that there were no currency manipulators worth mentioning. If you combine this with the docile stance on human rights that my Shadow Government colleagues have already mentioned, it might be explained as a surprising but consistent attempt to engage China as an important economic player. Yet the administration also chose to confront the Chinese with a weak decision on low-cost tires.

Constructive Criticism?

For constructive criticism, I would turn to the administration's broader trade policy. President Obama has attempted to warm international relations while chilling commercial relations. In China, Colombia, S. Korea, Brazil, India, and the European Union, there is growing aggravation at the administration's lack of a trade policy. It is high time that the president deliver his long-promised speech and resolve the conflicts within his party on trade. That could clear the way for reengagement with the rest of the world.

Prediction?

Finally, as a prediction for one year hence, I forecast serious international rancor over the environment. President Obama is in a bind. If there is no U.S. action on climate change, there will be sharp condemnation and disillusionment from abroad. If there is action, it seems likely to entail border measures (tariffs) that could threaten the global trading system. It is hard to see how this ends well.

PHILIPPE WOJAZER/AFP/Getty Images

By Will Inboden

Surprise?

If one year ago on Election Day someone would have told me that the same President Obama whose campaign promised to repair America's global image would spend his first year in office visibly rejecting human rights and democracy promotion, I would not have believed it. Though I and many others have commented on this previously, it still ranks as the biggest surprise (and biggest disappointment) of his foreign policy thus far. Especially since America's historic commitment to human rights and democracy promotion has been one of its greatest soft power assets and sources of global goodwill.

Praiseworthy?

One thing worthy of praise is the administration's emerging Africa policy. President Obama's speech in Ghana was an admirable call for improved governance, reduced corruption, growth through enterprise, and African responsibility for Africa's future -- and it could not have been delivered by a more effective messenger.

Constructive Criticism?

One growing worry is the Obama administration's shaky relations with the Great Powers which -- whether from poor personal chemistry or divergent interests -- could significantly hinder U.S. leverage going forward on several fronts. U.S.-Japan relations are near their worst in a generation (though the Obama administration was dealt a tough hand with the DPJ's election victory). The chill between Sarkozy and Obama is also hurting U.S. relations with France. Russia has thus far offered no significant reciprocal gestures for the U.S. capitulation on missile defense. Obama enjoys little chemistry with Gordon Brown (though to be fair, few leaders do) and has signaled indifference towards the U.S.-UK Special Relationship. U.S.-Germany ties are strong but will soon be tested by Germany's economic relationship with Iran. The Obama administration's China policy is too focused on financing U.S. debt while not pressing China to play a more constructive role on North Korea and Iran's nuclear weapons programs. And while the administration is atoning for its early neglect of India by hosting Prime Minister Singh soon for a state visit, the U.S.-India relationship will need consistent and high level attention in order to reach its potential -- attention that it is not clear the White House will maintain, especially if doing so incurs China's displeasure.  

MICHEL EULER/AFP/Getty Images

After my previous posts in this series grappled with the likely plight of the falling dollar and some of the economic implications of its privileged status in the global economy, this concluding post will consider the question:

What do the dollar's role and value mean for U.S. foreign policy?

There is a macho tinge to the U.S. Treasury mantra that a strong dollar is in the U.S. interest. After all, isn't it always better to be strong than weak? There is a suggestion that at $1 to the euro, we are virile and able to bend other nations to our will, while at $2 to the euro, we will be feeble and submissive.

It is not obvious why that should be so. There are a couple upsides to a weaker dollar. Fred Bergsten, in a new Foreign Affairs analysis, argues that "the United States itself would benefit from a reduction in the international role of the dollar." In Bergsten's view, the easy credit that has accompanied dollar primacy has tempted the country into misguided policies. He writes: "Unless the United States quickly achieves and maintains a sustainable economic position, its ability to pursue autonomous economic and foreign policies will become increasingly compromised." A falling dollar is thus a mechanism whereby excessive U.S. borrowing from abroad can be rolled back. To the extent a weakened dollar would bring about such global rebalancing, it would help to meet a stated goal of world leaders in recent G-20 meetings.

Beyond this indirect gain, the most direct effect of a weakened dollar would be to hike the cost of goods imported into the United States and make American goods appear cheaper to the rest of the world. This, over time, would likely ease the pressures for trade protectionism that have increasingly strained U.S. relations with countries like China, Canada, Mexico, and the members of the European Union.

Each of those benefits to a diminished dollar shares a similar quality. Under a strong dollar, the argument goes, we cannot resist the temptation to sin. We know that excessive borrowing is a bad idea, but we just can't help ourselves. We know that trade protection is ill-advised, but who can resist the political pressure?

As soon as we move away from introspection, we see some of the foreign policy downsides to a weaker dollar. The first and most direct are the economic impacts. With a weaker dollar, all U.S. ventures abroad become more expensive. During the period of the dollar's decline, the United States becomes less attractive as an investment destination, since foreign investors would expect to recoup fewer yen, yuan, or euros when they cash out. Future financial crises - and they are sure to come -- will be much more painful if global investors do not rush to the dollar as a safe haven.

An even greater difficulty, from a foreign policy standpoint, could be a sense among allies that the United States is an unreliable partner. As the provider of the world's reserve currency, America has had both special rights and special obligations. The rights have included the ability to print money to pay for whatever we liked (technical term: seigniorage). The obligation has been to keep the value of the dollar relatively stable. From the reactions to the dollar's recent slide, we can anticipate the sort of discord that might accompany a more significant move. From Thursday's Washington Post:

The weak dollar is becoming a source of international tension, particularly in U.S.-European relations. Officials in the 16 countries that use the euro warn a continued slide of the dollar may pose long-term structural problems for Europe, forcing down wages and hurting employment in the months and years ahead. This week, a top aide to French President Nicolas Sarkozy called the value of the dollar "a disaster" for Europe, warning of dire consequences to the global economy if it remains at its current levels.

China reacted to U.S. borrowing plans at the beginning of this year with a call for guarantees of the value of its dollar lending. They were clearly worried about a depreciation of the dollar, which would undercut the value of China's massive reserves.  While G-20 nations were calling for global rebalancing at their Pittsburgh summit (by which they really meant that China should appreciate its currency and import more goods), Chinese President Hu Jintao said:

"Major reserve-currency issuing countries should take into account and balance the implications of their monetary policies for both their own economies and the world economy with a view to upholding stability of international financial markets."

This nicely captures the dilemma facing the Obama Administration. How do you catch a falling dollar? A classic approach would be for the U.S. government to stand ready to raise interest rates and adopt plans for future fiscal austerity. It would be responsible, but it would not be much fun, particularly at a time when U.S. unemployment is approaching 10 percent.

Suppose, instead, the dollar continues to slide and loses its premier status among world currencies. There could be domestic political benefits, but it would leave key countries economically bruised and seething. It is very difficult to tell such a story in which the United States' standing, prestige, and ability to project power do not decline along with its currency. U.S. foreign policy prowess would not be immune should the dollar fall from grace.

John Moore/Getty Images