Baucus Said to Be Obama Pick as U.S. Ambassador to China

President Barack Obama will appoint Senate Finance Committee Chairman Max Baucus as ambassador to China, two people with knowledge of the matter said today.

Baucus, 72, would take the post at a time of tension and promise between the world’s two largest economies. China and the U.S. have been clashing over a territorial dispute in the East China Sea, the intellectual property rights of U.S. companies and surveillance by the National Security Agency.

Baucus is a Democrat who has been in the Senate since 1978 and has been the party’s leading voice on trade policy since 2001. He has traveled to China eight times, most recently in 2010, when he met with Xi Jinping, now the nation’s president.

“He knows these guys in Chinese leadership extremely well and has met with them on several occasions,” Jon Selib, Baucus’s chief of staff from 2008 to 2012, said today in an interview. “He’s not going there to represent Beijing. He’s going there to represent America. He’s going to deliver tough messages, when he has to, but do it in a diplomatic way.”

Obama met with Xi in June, saying the goal in two days of talks in California was to “forge a new model of cooperation between countries based on mutual interest and mutual respect.”

Baucus would replace Gary Locke, who said last month that he would leave his post.

‘Angry Rhetoric’

In a speech during the 2010 trip, Baucus emphasized his past support of permanent normal trade relations with China and noted the “angry rhetoric” and complaints about “protectionist policies” from both countries.

“Resolving our differences does not mean papering them over,” he said. “But it does mean we must respect the impact our policies have on one another.”

As ambassador, Baucus would be the U.S. point person in Beijing as the two governments navigate a sometimes tense relationship on trade and currency issues. While the U.S. and China in recent years have sparred over policies on clean energy, autos, rare-earth elements and poultry, their economies are increasingly intertwined and China is the U.S.’s second-largest trading partner after Canada.

Baucus said in 2010 that Chinese currency undervaluation hurts U.S. ranchers, farmers, exporters and workers.

$536 Billion

Total U.S. merchandise trade with China last year was about $536 billion, almost four times higher than it was a decade earlier. The U.S. last year had a record $315 billion trade deficit with China.

U.S. Commerce Secretary Penny Pritzker, Trade Representative Michael Froman and Agriculture Secretary Tom Vilsack are in Beijing this week to participate in the U.S.- China Joint Commission on Commerce and Trade talks.

A Democratic official, who spoke on the condition of anonymity, said Baucus has consistently called on China to play by internationally accepted rules for currency, intellectual property, labor, human rights and the environment.

On domestic policy, Baucus sometimes infuriated members of his party by agreeing with Republicans on such issues as the estate tax and backing President George W. Bush’s 2001 tax cuts.

He was the lead author of Obama’s 2010 health-care law.

Baucus announced this year that he wouldn’t seek a seventh term in 2014 and would build a new home in Montana.

The move would let Montana Governor Steve Bullock, a Democrat, appoint a temporary successor to Baucus. Bullock’s choice of a Democrat would maintain the Senate’s 55-45 party ratio. It potentially also could give Lieutenant Governor John Walsh, a Democrat seeking Baucus’s seat, an edge as an incumbent in a state Obama lost last year.

Tax Changes

The two people with knowledge of the matter spoke on condition of anonymity because the choice hasn’t been announced publicly. The White House didn’t immediately respond to a request for comment. Baucus's selection was first reported by website earlier today.

Baucus has been urging the most significant changes to the U.S. tax code since 1986, an effort that will be upended if he’s nominated and confirmed for the China post.

In his April announcement that he’d be retiring from the Senate, Baucus said he’d be “liberated” from the burdens of campaigning to focus on policy work, particularly on taxes. While he has released draft proposals, including one today, a revamp of the tax code has stalled because of the partisan divide over whether the government should raise more revenue.

Confirmation Urged

Senator Orrin Hatch of Utah, the top Republican on the Finance Committee, said Baucus should be confirmed immediately. He said the odds against major tax changes were already long.

“I don’t think the Senate Democrats want it, and I’m not so sure the people in the House want to go through that right now,” he said. “But it could happen, and if we did it right, I’d be 100 percent for it happening.”

Senator Jay Rockefeller of West Virginia is the next most senior Democrat on the Finance Committee and would be in line for the chairmanship. He is also retiring at the end of 2014 and is chairman of the Commerce Committee.

Next in line on the panel is Ron Wyden of Oregon.

Baucus won quick praise from Senator John McCain, an Arizona Republican.

“I think he’d do a fine job,” McCain said. “He has a long and extensive background in China.”

The U.S. has rejected China’s claim to an expanded air defense zone that covers areas claimed by neighbors Japan and South Korea, both U.S. allies, in the East China Sea. The tension was a main topic of discussion when Vice President Joe Biden met with Chinese leaders in Beijing earlier this month.

A related dispute is taking place with Vietnam and the Philippines in the South China Sea, an area that is estimated to have as much as 30 billion metric tons of oil and 16 trillion cubic meters of gas. A U.S. Navy ship had a confrontation with a Chinese military vessel in the South China Sea on Dec. 5.

Before it's here, it's on the Bloomberg Terminal.