Trade is clearest McCain-Obama Asian policy divide

By Paul Eckert, Asia Correspondent - Analysis

WASHINGTON (Reuters) - Presidential hopefuls Barack Obama and John McCain agree much more than they disagree on diplomatic and security challenges in Asia, but differ sharply on trade with the region.

Policy statements and debates among advisors of the rival campaigns leading up to Tuesday's election show differences mainly of style and tone amid wider agreement on issues including Afghanistan, Pakistan, China and North Korea.

But in an election in which a U.S.-bred global financial crisis and American voters' economic fears have trumped foreign policy issues, trade is a clear dividing line.

Reflecting the stance of the Democratic majority in Congress, Obama has said he opposes a bilateral free trade agreement with South Korea unless it is renegotiated to grant greater access to that market for U.S. automakers.

The Illinois senator last month also told a U.S. textile group he would monitor textile imports from China and consider imposing emergency safeguard restrictions on imports of Chinese goods under American trade law.

Obama also vowed to use all available measures to press Beijing to change a foreign exchange policy critics say undervalues its currency to boost exports, contributing to a $260 billion U.S. trade deficit with China.

Republican McCain, who has a long pro-trade track record, has pointedly endorsed the 2007 free trade agreement with South Korea. His aides argue the pact will increase annual trade by some $10 billion and cement ties with a key U.S. ally.

"The addition of exports for U.S. jobs ... is just key, and Senator Obama has campaigned heavily against it -- giving congressional Democrats room to say they're not going to bring it forward," said Daniel Blumenthal, a McCain adviser on Asia.

"If we pull out of the largest and best quality free trade agreement yet negotiated in Asia, we have a very, very thin hand to play," Michael Green, a second McCain adviser on the region, said in a recent policy debate in Washington.

Representing the Democrats at that debate, Frank Jannuzi said "Obama is free trade at the core" but that the U.S.-Korea trade deal was "flawed" in its handling of U.S. car exports.

'PROTECTIONIST IMPULSES' OR CONGRESS

The pact "will be ratified in an Obama Administration, but ratified with the proper safeguards," said Jannuzi.

McCain has offered less detail on China trade, but has called for a more flexible Chinese exchange rate and listed "mercantilist economic practices" among what he considers problematic Chinese international behavior.

Brookings Institution visiting scholar Michael Fullilove, analyzing policy differences, wrote that free trade advocates should ask "not which candidate is the purer of the two, but rather, who would be in a better position to tone down the protectionist impulses of the next Congress, which is likely to be strongly Democratic?"

Beyond trade, whoever wins the White House on Tuesday will inherit from President George W. Bush a tortuous nuclear disarmament process with North Korea and a relationship with China that has been tranquil but poses potential problems over military issues, Taiwan and human rights.