Foreign Affairs

Davis Out of Senate Race; Leaves House Race Question

Friends of Rep. Tom Davis (R.-VA) warned me not to believe everything I read in the morning paper, and not to write a story before I sat down with him at the Christian Science Monitor breakfast this morning.  Sure, they said, seven-termer Davis would probably choose not to run for the seat of retiring Sen. John Warner (R.-VA.), the state GOP’s choice of a convention rather than a primary as a venue for choosing a nominee working against Davis.  But as to whether he would run again in his Northern Virginia district or retire altogether to go into private business, well, I would just have to wait.

Well, I did.  Because of the rain, the Monitor’s Dave Cook told a packed breakfast, Davis would be ten minutes late.  More suspense.

Finally, the man of the hour arrived and, sure enough, he confirmed he wouldn’t run for the Senate.  And for his House seat?

 “That’s for another day,” he deadpanned, “Let’s milk that one a bit.”  Clearly enjoying himself, Davis gave no clue as to when he would reveal his plans for ’08.

The master political strategist, a past chairman of the National Republican Congressional Committee, pulled no punches about his dark view of the Republican Party in ’08.   He cited “a very unpopular President and a very unpopular war” as reasons.  He also faulted Republicans for not recognizing changes in the modern electorate and how the world is underdoing change.  In his words, “The issues that got us elected in the 1990’s aren’t working now.”  He also spanked fellow party members because, he believes, “they are more excited about beating other Republicans than beating Democrats”and for being “out of sinc with independents.”  He also staunchly defended his opposition to the President’s veto of the State Children’s Health Insurance Program (SCHIP), saying “Kids ought to be covered [by healthcare].”  

That said, Davis was not all gloom and doom.  Like Newt Gingrich, he noted that French conservatives were able to win the presidency with Nicholas Sarkozy when polls showed outgoing President Jacques Chirac with lower voter approval than Bush has now.  “We just have to change some things,” he said, adding that candidates who interested him included Rudy Giuliani (“He’s outside the box”), John McCain (“a reputation for independence”), and Mitt Romney (“who used to be an independent New England governor, although he sounds different now”).  What the party definitely doesn’t want or need, he emphasized, “is Bush III.”

Also possibly helping Republicans, Davis feels, is that “Congress is not held in very active regard” under the Democrats.  “They have not been able to consolidate —  they’re holding up trade agreements with countries like Peru and South Korean,” he said, “But we haven’t stepped forward either.”

In discussing Virginia politics, Davis made little secret of his distaste for the convention system that the state GOP’s ruling committee voted for over the primary he wanted so desperatetly, or for former Virginia Gov. and now-certain Senate nominee Jim Gilmore.  Primaries, Davis believes, “help build an organization and help the party to grow.” Conventions “limit participation,” he added, citing the example of people on active duty in the military who are barred from participating in conventions.

Noting that he would have been the first Northern Virginian on a statewide GOP ticket since 1981 had he run and been nominated next year, Davis recalled how Sen. George Allen was beaten in Northern Virginia by 120,000 as he lost re-election last year and defeated GOP gubernatorial candidate Jerry Kilgore lost Northern Virginia by 110,000 in ’05.  Likely Democratic nominee and Northern Virginian Mark Warner, a former governor, is “affable” and “can raise a lot of money.”  Would he consider trying to find another Republican other than Gilmore?  “A lot of other people are saying that?” shot back Davis.  Will he back Gilmore?  “I will endorse the Republican nominee,” he said, but added that when he does that is for “another time and another day.”  

Parting Shots:  IMF On China

Three days after the close of the week-long meeting of the World Bank/International Monetary Fund last week, the big news was that there was no big news.  The closing press conference featuring Bank President Robert Zoellick and IMF Managing Director Rodrigo de Rato (who will be succeeded next week by former French Finance Minister Dominique Strauss Kahn) was notable in that it was light years removed from its counterpart at the close of the spring World Bank/IMF conclave.  On that occasion, then-Bank President President Paul Wolfowitz was under intense fire over the promotion of a close female friend who worked for the Bank; questions about the embattled Wolfowitz and “your girlfriend”  (the term drawing laughter) dominated the press briefing, a microphone had to be wrestled away from a questioner who went into a long tirade.  The “Wolfowitz Show” was the lead story on the “BBC World News” that evening.  When I walked into the standing-room-only press conference in the Spring, the very capable Nazanine Atabaki of the World Bank Communications Division came up to me, handed me a communiqué, and said “You want Paragraph 16” — which dealt with the Wolfowitz controversy.
 
Now Wolfowitz was gone, there were available chairs at the press conference and this time, when Miss Atabaki handed me a communiqué and told me what I should be reading, it was a paragraph on climate change — a growing priority for the Bank.  The only question that faintly recalled the ethics and morale issues of the past meeting came from Lucy Conger of Emerging Markets and Zoellick hit it out of the ballpark.

My question to both Zoellick and de Rato noted their earlier emphasis on China and and about growing initiatives with their economy to help development.  I noted that one of the complaints that’s always heard about China is that its currency is overvalued, and that particularly has been a roadblock and a source for discouragement to countries that would like to market there and invest there, such as Latin American countries.  

“Have you taken any stand on that,” I asked, “Or talked to any Chinese officials about what to do about a currency that’s said to be overvalued?
 
“Well, in the sense of allocation of responsibilities, the IMF handles the macroeconomic issues,” replied Zoellick, deferring to deRato.  
 
“Okay, yes, that’s true,” replied DeRato, whose return to politics in Spain is widely rumored, “ “I want to say that from the point of view of China, the Fund has been expressing the view that it is in the Chinese interest to let its currency be determined by market forces.  And right now, as we see, it is considerably undervalued.” 

[The terms “overvalued” and “undervalued” sometimes create controversy, especially when it comes to China.  Generally speaking, people do say the Chinese currency is "undervalued" and because of China’s huge trade surplus with America that the yaun should rise in value as people purchase yuan to buy Chinese products. But the Chinese government has offset this by purchasing dollars to buy US Treasury securities in a big way. Thus, the Chinese government  is the biggest lender to the US gov for its spending and it keeps Chinese products cheap.Discussing  the dispute with DeRato over terminology, Patrick Anderson of the Anderson Economic Group, former top economist for the Alexander Hamilton Life Insurance Company, told me: “People who try to devalue the currency to make goods seem less are also discounting the price and there will be a penalty paid by the manipulator.  Investors in China must be careful because there is worry whether the entire investment be confiscated in the future.”  One IMF official told me after the exchange with deRato over “undervalued” and “overvalued” that “Perhaps the best term to describe the Chinese currency is ‘misaligned.’]
 
DeRato went on to tell me that the IMF thinks “that the Chinese rebalancing of demand that I was referring previously to your colleague…that monetary policy will play a more clear role in price stability, and we see inflation creeping up in China, and that, of course, will require, among other things, that market forces will determine more fully the value of the currency.
 
“That said, I don’t think China has a problem of attracting investment.  I mean, if it’s any problem, it would be the contrary.  I think the attractiveness of the Chinese economy is very clear, and right now, there is a lot of investment in China, both domestic and international.  In fact, if we have something to say, it’s that in China, in that rebalancing of demand, probably investment should go down a little bit in share of GDP.”  (While no one is arguing that foreign investment is booming in China now, the question was whether smaller economies such as those in Latin America can beak into it — something DeRato ducked).  
 
We’ll see what his successor has to say about this.  Stay tuned. 


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