Critics upset with US stance on Chinese currency
Critics complain the Bush administration once again dropped the ball by failing to cite China for a currency system they see as a prime culprit in the loss of millions of United States manufacturing jobs.
The administration said in a report to Congress on Wednesday that China moves too slowly to reform its currency system, but isn’t technically a currency manipulator.
“We are extremely dissatisfied with the slow and disappointing pace of reform of the Chinese exchange rate system,” Treasury Secretary John Snow said during a briefing on the report. He promised to “monitor closely” China’s future actions.
If the administration had deemed China a currency manipulator, that would have triggered talks between the two countries. China also might have faced trade sanctions—but first the United States would have had to win a case on the issue before the World Trade Organisation.
The decision not to cite China outraged critics, who said the administration allowed its concerns about enlisting China’s help on issues such as constraining the nuclear ambitions of Iran and North Korea to trump the needs of American workers.
American manufacturers contend China undervalues its currency by as much as 40% against the dollar, which makes Chinese goods cheaper for American consumers and American goods more expensive in China.
They point to the US trade deficit with China—which hit a record of $202-billion last year and is the highest ever recorded with any country—as a prime reason the administration needs to force China to revalue its currency.
China did announce in July that it was breaking its eight-year-old tight link to the dollar. But since then, critics say, the yuan has risen in value by little over 3% against the dollar, far below what’s needed to make a dent in the trade deficit.
The administration’s decision came under attack from Democrats and Republicans. Snow will likely face tough questions from the Senate Banking Committee when he testifies about the report next week.
“The administration is making a habit of stepping up to the line and never going over the line,” said Senator Charles Schumer, a Democrat.
“They put geopolitical concerns ahead of economic concerns.”
Senator Olympia Snowe, a Republican, urged Congress to act quickly to protect US manufacturers. Republican Phil English, a Republican, complained “the administration chose to plant its head in the sand”.
Richard Trumka, the secretary-treasurer of the AFL-CIO, agreed.
“When it comes to China, they are all bark and no bite,” Trumka said of the administration.
John Engler, head of the National Association of Manufacturers, warned of rising protectionist sentiment in an election year.
The currency report, which the administration must present to Congress every six months, was delayed by a few weeks, until after Chinese President Hu Jintao and President George Bush discussed the issue at the White House on April 20.
The administration had hoped that Hu would signal China would move faster; no such announcement came.
Schumer and Senator Lindsey Graham, a Republican, said that unless they see significant movement soon on the value of the yuan, they would push their legislation calling for 27,5% tariffs on all Chinese goods coming into the United States.
“We’re tired of making excuses ... to people in my state who are being devastated by currency manipulation,” Graham said.
Senate Finance Committee chairperson Charles Grassley, a Republican, and Senator Max Baucus, the top Democrat on the panel, said the administration’s failure to act underscored the need for their legislation.
They proposed withholding economic privileges from China until it overhauls its currency system, which is generally regarded as a less punitive response than the Schumer-Graham proposal for across-the-board tariffs. - Sapa-AP