Treaty of Wanghia

Oil painting by Robert Huffstutter  of the Treaty of Wanghia, signed by the U.S. and Qing dynasty China in 1844

Whether it is Barack Obama or Mitt Romney who wins the 2012 presidential election, either candidate will have to deal with the fallout of the political cycle and what their pronouncements actually mean for policy and the business environment, particularly in the context of U.S.-China trade relations.

It goes without saying that the United States’ economic relationship with China, its largest trading partner, is a critical one for business in both countries, whether it’s the interest of large corporations or small-time entrepreneurs as this article points out.

Romney has made “getting tough on China” a key aspect of his platform, saying that he will label China a currency manipulator on “day one” of his presidency. While this claim which has attracted considerable skepticism (and as with other recent Romney pronouncements may be no more than a cynical attempt to appeal to swing voters), Romney’s heated rhetoric on this issue has undoubtedly helped him win support from an energized Republican base, who will no doubt expect him to follow through on his bold claims. His running mate Paul Ryan has also been hitting Obama’s record on China as he campaigns in the swing states.

For President Obama, meanwhile, the last thing that the incumbent president could want is to appear weak or unable to negotiate effectively with the Chinese. As China struggles with a leadership crisis of its own, the sitting U.S. president must balance the concerns of good diplomacy and foreign relations with those of being re-elected by his own constituents. Obama’s counter to Romney, however also bears some skepticism: While Obama says he has brought a string of successful WTO cases against China, WTO arbitration happens all the time, even between countries with good economic and political relations.

What if either candidate did really “crack down on China” as Romney promised during the second presidential debate? What would that crackdown actually look like? A China-U.S. trade war and any resulting economic sanctions would have disastrous consequences for local business in states like California. Surging American exports to China and other emerging markets are expected to be a major source of new jobs and revenue over the next decade.

Perhaps the presidential candidates need to take a break from rhetoric and take a cold, hard look at the facts of what is actually good for American business and jobs.  As Stephen S. Roach, Yale faculty member and author of “The Next Asia”, wrote in Australia’s Financial Review, “Both Obama and Romney run the risk of painting themselves into a corner when it comes to China. That could take all of us to the edge of a slippery slope. America’s leaders need to come clean with the American people – before it is too late.”

But as the presidential election enters its final decisive phase in the swing states and every persuasive soundbite matters, that is sadly unlikely.