Obama Focuses at UN on Mideast, Currency Friction With China

President Barack Obama used the backdrop of the United Nations General Assembly meeting to tackle tensions with China and to urge world leaders to support the Middle East peace process, two issues that are testing his economic and foreign policy plans.

The U.S. president pressed China’s Premier Wen Jiabao over currency valuation during a two-hour meeting yesterday, an adviser said, as momentum is building in Congress for trade sanctions if the yuan remains what the U.S. views as undervalued.

Earlier in the day, Obama told members of the UN they must support Israel and the Palestinians as peace talks face a critical test with the scheduled Sept. 26 expiration of Israel’s 10-month moratorium on settlement construction. Obama reiterated his call for Israel to extend the moratorium as a way to build trust and keep the process going.

“Now is the time for this opportunity to be seized, so that it does not slip away,” Obama said in his address to the General Assembly.

The president’s focus on currency and trade with China and the U.S.-brokered Middle East peace talks underscores the importance of both issues to Obama’s broader goals of strengthening the economic recovery and addressing global security. They also are taking prominence as U.S. voters are looking toward November elections that will decide control of Congress and Obama’s approval rating is stuck at less than 50 percent in most national polls.

U.S.-China Cooperation

In remarks to reporters before their meeting yesterday, Obama and Wen papered over friction points. Obama called China an “outstanding partner” and said its cooperation with the U.S. was “absolutely critical” in dealing with the financial crisis.

Wen said through a translator the common interests of the U.S. and China “far outweigh” any differences. He also said he wants to “foster favorable conditions” for a U.S. visit by President Hu Jintao sometime next year, which administration officials said may be as early as January 2011.

At a briefing afterward, Jeff Bader, Obama’s director of Asian affairs, said China’s currency valuation was the “most important issue” in the talks.

The yuan has appreciated about 2 percent against the dollar since June 19, when the central bank said it would pursue a more flexible exchange rate after keeping the currency at about 6.83 versus the U.S. currency for almost two years.

‘More Action’

“The president made clear that we’re expecting to see more action, more significant movement” on China’s currency, Bader said. Obama made clear “that he’s going to protect U.S. economic interests and that we look for the Chinese to take actions. If they don’t take actions, we have other means of protecting U.S. interests.”

Chinese leaders are aware of the building momentum in the U.S. Congress for action to restrict China’s imports over the currency issue, Bader said.

“There was a lengthy discussion of the impact and the politics of the issue,” he said.

House Democratic leaders say they are moving forward with legislation intended to push China to raise the value of its currency by allowing U.S. companies to petition for duties on imports. Polls showing Democratic seats at risk heading into the November elections may boost prospects for the bill.

“We’re seeing a learned response from the administration on China, that they’ve got to take a firm line and say what they mean,” said Ernest Bower, an analyst with the Center for Strategic and International Studies in Washington, wrote in a report.

Middle East

Obama devoted much of his address to the General Assembly on the Middle East. He reiterated the U.S. commitment to Israel’s security and urged Arab nations to match their pledges of support for the peace process with deeds that will push it forward, including “demonstrating the normalization” promised to Israel.

“Peace must be made by Israelis and Palestinians, but each of us has a responsibility to do our part as well,” Obama said.

Talks face a critical juncture this weekend as Israeli Prime Minister Benjamin Netanyahu repeatedly has said he doesn’t plan to extend the settlement construction freeze. Palestinian Authority President Mahmoud Abbas said the talks, which began earlier this month in Washington, can’t continue if construction resumes.

Building Trust

“Now is the time for the parties to help each other overcome this obstacle,” Obama said at the UN. “Now is the time to build the trust -- and provide the time -- for substantial progress to be made.”

Obama said those who count themselves as friends of the Palestinians in the Arab world must seize the opportunity for a peace agreement that will lead to a Palestinian state. They can do that by supporting the Palestinian Authority financially and politically and by coming to terms with Israel’s existence, he said.

“Those who long to see an independent Palestine rise must stop trying to tear Israel down,” Obama said.

He also pledged firm U.S. backing for Israel.

“After 60 years in the community of nations, Israel’s existence must not be a subject for debate,” Obama said. “It should be clear to all that efforts to chip away at Israel’s legitimacy will only be met by the unshakeable opposition of the United States.”

While Abbas was in attendance, Israel’s delegation wasn’t present for the speech or the rest of the day’s sessions because of the Jewish holiday of Sukkot, according to a statement from the Israeli consulate. The U.S. was aware that the delegation would be absent, the statement said.

To contact the reporter on this story: Kate Andersen Brower in New York at kandersen7@bloomberg.net; Julianna Goldman in New York at jgoldman6@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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