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Thursday May 7th, 2015 5:40AM

Obama names China envoy, economic ties in mind

By The Associated Press
WASHINGTON (AP) -- The nomination of veteran Sen. Max Baucus as U.S. ambassador to China reflects the importance to Washington of advancing the economic relationship with the Asian power despite recent strains on security issues.

The Montana Democrat lacks foreign policy credentials but has a track record in pressing Beijing over trade barriers and its currency exchange rate. If his appointment is confirmed by the Senate, he will be looking to see that U.S. companies can benefit from market reforms the ruling communist party promised in November.

While the economic relationship between the countries is loaded with its own problems, including accusations of rampant Chinese cybertheft of U.S. trade secrets, it is one where their national interests are more aligned than on security, as China challenges decades of U.S. military pre-eminence in the Asia-Pacific.

China's declaration of an air defense zone over disputed territory in the East China Sea and a near-collision of U.S. and Chinese naval vessels this month brought those concerns to the fore. Defense Secretary Chuck Hagel on Thursday described China's conduct in the Dec. 5 incident in the South China Sea as "irresponsible."

But when President Barack Obama announced Friday his intent to nominate Baucus as ambassador, he was stressing the senator's work over two decades on economic agreements with China that he said have created millions of American jobs. "He's perfectly suited to build on that progress in his new role," Obama said in a statement and called for a swift confirmation.

Baucus pushed for China's inclusion in the World Trade Organization in 2001, a key step in its integration in the world economy. Since then China has emerged as world's second-largest economy after the U.S., and America's second-largest trading partner. Two-way trade is projected to reach $558 billion in 2013.

But China's record on its WTO obligations is mixed, and trade with the U.S. is skewed heavily in China's favor. As chair of the powerful Senate Finance Committee, which oversees trade, Baucus has in recent years sponsored legislation to punish China for undervaluing its currency to benefit its exporters. The measure never made it into law. He's also criticized China for shutting out U.S. beef imports. But he's remained a strong advocate of expanding trade.

"The economic and financial relationship with China is crucial," said Cheng Li, a China expert at the Brookings Institution, a Washington think tank. "If that part of the relationship is healthy it can spill over and have a positive effect in other areas. But if it's jeopardized it can adversely affect other areas, including on security."

He expected China's leaders to welcome Baucus' appointment, given his stature as a six-term senator and close ties with Obama.

China's Global Times newspaper, which is affiliated with the ruling party, said Baucus' experience made him a good pick for the job.

"We hope and believe that Mr. Baucus can bring his Capitol Hill experience and personal relationship with the president to use in furthering U.S.-China trade ties and the building of a new type of major state-to-state relationship," the paper said, using Beijing's buzzword for its desire to be treated by Washington as an equal.

Comments on China's Twitter-like Weibo microblogging service were also largely positive, although some wondered whether the 72-year-old would be able to adapt to the Chinese capital's notorious smog.

The incumbent is former commerce secretary Gary Locke. As the first Chinese-American ambassador to Beijing, Locke has been a well-known and generally well-liked figure in China. He created a buzz among ordinary Chinese even before he arrived in Beijing after he was photographed wearing a backpack and trying to use a coupon to buy coffee at Seattle's airport. Many Chinese Internet users pointed out the contrast with Chinese bureaucrats, who routinely have aides carry their bags and attend to minor tasks.

Locke has navigated choppy waters in the relationship, notably when dissident lawyer Chen Guangcheng in 2012 sought refuge in the U.S. Embassy on the eve of high-level U.S.-China talks in Beijing. China subsequently allowed Chen to leave for New York, and the talks proceeded.

The latest turbulence has centered on China pressing its territorial claim against U.S. ally Japan in the East China Sea. China's effort to control air space in the region was criticized this week by Secretary of State John Kerry, who said it "clearly increases the risk of a dangerous miscalculation or an accident."

Given the prickly state of the relationship, Bonnie Glaser, a China expert at the Center for Strategic and International Studies, voiced surprise that Obama did not select an envoy with more clout on hard security issues.

She said the nomination of Baucus reflected the president's tendency to focus on the economic aspects of the relationship with China, as he seeks to boost exports and reduce unemployment at home.

His administration wants to "level the playing field" for American companies: curb cybercrime and theft of intellectual property and improve market access, particularly in the heavily restricted services sector. The U.S. has welcomed China's intent to open state-dominated industries wider to private competition and ease limits on foreign investment.

Erin Ennis, vice president of the U.S.-China Business Council, said a key U.S. priority for Baucus should be to negotiate a strong bilateral investment treaty. She said discussions on a text are expected to start early next year, and as new ambassador, Baucus could help China understand what it will take for an agreement to win Senate ratification.
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