The Cable

Clinton to Asia on debt ceiling crisis: Don’t panic

As the nation careens toward a possible debt default, Secretary of State Hillary Clinton urged Asian business leaders not to overreact to the U.S. political crisis, taking some implicit shots at China's economic policies as well.

"The political wrangling in Washington is intense right now. But these kinds of debates have been a constant in our political life throughout the history of our republic. And sometimes, they are messy," Clinton said in Hong Kong on Monday. "But this is how an open and democratic society ultimately comes together to reach the right solutions."

"Through more than a century of growth, the American economy has repeatedly shown its strength, its resilience, and its unrivaled capacity to adapt and reinvent itself," she said. "And it will keep doing so."

Clinton, who was speaking at an event organized by the Macau chambers of commerce and the Asia Society, said that economics is becoming a higher priority in U.S. foreign policy. She pledged to give a major speech on "America's strategic and economic choices" this fall, and argued that the United States' and East Asia's economies are inextricably linked.

"We are a resident power in Asia -- not only a diplomatic or military power, but a resident economic power. And we are here to stay," she said.

In remarks that appeared at times to be directed at China, Clinton then went on to call for fairness and transparency in economic systems.

"Openness, freedom and transparency contribute to the fourth principle we must ensure: fairness. Fairness sustains faith in the system," she said. "That faith is difficult to sustain when companies are forced to trade away their intellectual property just to enter or expand in a foreign market, or when vital supply chains are blocked. These kinds of actions undermine fair competition, which turns many off from competing at all."

The Chinese government, the largest holder of U.S. debt, has been largely silent about the U.S. debt ceiling crisis. But experts warn that the failure of the U.S. government to resolve the issue expeditiously could further undermine confidence in the already weak U.S. dollar and harm the overall image of the U.S. as a competent world leader.

"We've got repeated statements from Chinese officials of sort of, you know, we hate you guys, but we don't have any choice. And we're still buying your debt, because we don't see anywhere else to buy it," said Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations. "But, when the reserve currency is unloved by the accumulators of those reserves -- namely, the central banks of countries like China -- you're on thin ice. They're buying the dollar assets, but they don't like it. And so they're looking actively over a sort of long-term horizon to try to find an alternative."

The Heritage Foundation's Derek Scissors wrote today that China has already slowed its purchase of U.S. Treasury bonds, but for the time being, China has few other options but to continue buying U.S. dollars.

"There's the idea that China can just stop buying foreign currency assets. False. The PRC's own balance of payments rules mean they have to keep buying, and they know they have to."

AFP/Getty Images

The Cable

Berman: Marathon foreign-policy markup was a 'series of tantrums'

The House Foreign Affairs Committee just spent two full days and nights marking up a State Department and foreign operations authorization bill in an effort that the committee's ranking Democrat says was a "waste of time" for a bill that has no chance of becoming law.

"There's no doubt that this was a bad bill as it started, and even though we knew it could get worse, we could not imagine it would get as bad as it did," Rep. Howard Berman (D-CA), said in a Friday interview with The Cable.

Berman said that the original draft of the bill, which included sweeping restrictions on foreign aid to countries around the world, was bad enough. But the over 100 amendments introduced by GOP congressmen sent an even more harmful signal to the world, he said -- namely, that the United States wanted to disengage from international forums and punish countries that don't always agree with the U.S. government.

"The thinking [on the GOP side] is, ‘something happens I don't like, and the way to deal with it is I throw a tantrum.' It's a series of tantrums," Berman said. "It's an absence of a notion between what we're doing and what the consequences of what we're doing are. It's operating from a gut instinct and them not using their heads."

What's more, since the bill has so many provisions and amendments that would undo the Obama administration's foreign policy, it's destined to fail in the Democrat-led Senate, much less be signed by the president.

"This bill's never going to be law. We spent from morning until late night, two straight days and hundreds of hours surrounding that markup, dealing with amendments and language on something that will have no impact on U.S. foreign policy because it will never come close to becoming law," Berman said.

He compared it to his time as a student in the Young Democrats movement in college, when the group would have spirited policy debates and issue resolutions just for the sake of theater and practice. "At the end of the day it was just a piece of paper, and that's what this is," he said.

But unlike the Young Democrats of the 1960s, the HFAC markup in 2011 does have a real and negative effect on U.S. power and influence, Berman said, because those watching the debate assume it has real implications.

"It was a waste of time, but people around the world in other countries and other governments don't know that it's a total waste of time and will never become law and they think this is where U.S. policy is heading and they are going to react," he said.

"So even the act of doing this hurt American interests, because it creates anger and hostility and makes all the things we need to do more difficult."

Berman highlighted an amendment to the bill sponsored by Western Hemisphere subcommittee chairman Connie Mack (R-FL) that would withdraw all U.S. contributions to the Organization of American States, calling it a "very extreme position."

Berman also criticized another amendment that would prohibit assistance to countries that vote against America at the United Nations a majority of the time on any and all votes, pointing out that amendment would prevent the United States from sending aid to Jordan -- despite the fact that Jordan is among the most pro-Western Arab countries and a supporter of Middle East peace.

"Passing an amendment to prohibits any assistance in any country where any government votes against us at the U.N. more than 50 percent of the time... whose interest is that serving?" Berman said. 

The U.N. amendment would also make aid to Pakistan would be impossible because Pakistan would fall into that category. But Berman pointed out that directly contradicted the committee's message when the committee voted39-5 not to cut off all assistance to Pakistan, rejecting an amendment by Rep. Dana Rohrabacher.

"Faced with an opportunity to cut off all economic aid to Pakistan, they rejected it on an overwhelmingly vote. But in three other amendments that the majority supported, they cut off all aid to Pakistan," he said.

The bill also would impose a ban on funding for international organizations that offer abortion counseling to clients, a version of what's known as the Mexico City Policy. Berman called it the "Mexico City Policy on steroids," because it does not allow exemptions for HIV/AIDS funding.

Some of the bill's provisions that Berman thought most counterproductive were more local. For example, the bill would eliminate USAID's new budget office.

"We want a more efficient and focused development assistance, we want better controls, so let's make sure that the agency that's in charge of this can't function," said Berman, characterizing the provision as "going back to the goal of incapacitating USAID."

A spokesman for HFAC Chairwoman Ileana Ros-Lehtinen (R-FL) said she was unavailable for an interview on Friday due to her travel schedule.

AFP/Getty Images