Wednesday, November 7, 2012

Obama Win draws a Yawn in Asia

Barack Obama's 2008 election was greeted by immense enthusiasm overseas. This year, it's more of a yawn, at least to judge by the reaction in Asia. Markets were flat—a key indicator in a region still heavily dependent for its own growth on the American economy—and local politicians and pundits were mostly quiet.

Beijing is certainly breathing a sigh of relief, for now. Mitt Romney had promised to designate China a currency manipulator on "day one," paving the way for retaliatory tariffs to press for a revaluation of the yuan. Obama at least won't wage a trade war to press Beijing for a rapid and probably economically unwarranted yuan appreciation that would sting the country's already-beleaguered exporters. But Beijing isn't about to forget all the other things over which Obama has been ready to launch trade actions, from discretionary "safeguard" tariffs he imposed on China-made tires to all the antidumping petitions lodged by the President's union and green-energy allies over steel products, solar panels and the like.

More broadly, many Asians are likely to end up disappointed, as suggested by the essentially flat market reaction to Obama's win. Obama will double down on the policies that have trapped U.S. growth somewhere between "sluggish" and "anemic." This poses a serious challenge for Asian economies that remain dependent on confident American consumers to buy Asian exports. One important factor for policy makers in the region is the near certainty that Ben Bernanke will be re-appointed to his current post in a second Obama administration. Asians already are struggling with the inflationary impact of rapid inflows of quantitative-easing capital fleeing America's ultra-low interest rates. Now there really is no relief in sight for them.

The other big question mark is strategic. Asians will follow Washington's upcoming debate about the fiscal cliff with deep interest not only for signs about American economic policies but also to see if Obama meant what he said when he assured voters in the third debate that sequestration-related cuts to the military budget "will not happen." Those things called ships about which  Obama lectured during that debate will be vital to supporting the alliances Secretary of State Hillary Clinton has tried to forge throughout Southeast Asia during Obama's first term. Japan, Vietnam, the Philippines, Indonesia and others would appreciate a greater U.S. naval presence in Asia as a counterbalance to China's growing assertiveness in its neighborhood.

Tuesday night was a nail-biter for American voters, but the real nail-biters for foreigners may be coming up soon. By JOSEPH STERNBERG WSJ

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