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04-16-2009, 12:01 PM
Obama Administration Won't Cite China On Currency
By Martin Crutsinger, AP Economics Writer
Manufacturing.Net - April 16, 2009

WASHINGTON (AP) -- The Obama administration on Wednesday declined to cite China as a country that is manipulating its currency to gain unfair trade advantages.

The finding in a semiannual Treasury Department report comes after Treasury Secretary Timothy Geithner said during his Senate confirmation hearings that President Barack Obama believed China was manipulating its currency.

Geithner's comments in January came in response to questions from the Senate Finance Committee and raised expectations that the new administration would take a tougher line in dealing with China than the Bush administration.

Geithner cited Obama's support as a senator of legislation that would have authorized a tougher enforcement process for currency manipulators.

Geithner said in January that Obama believed the process needed to be overhauled so that "countries like China cannot continue to get a free pass for undermining fair trade principles."

However, in a statement accompanying the new report, Geithner cited a number of actions China has taken in recent months to "enhance exchange rate flexibility."

Those actions included allowing its currency, the yuan, to rise in value against a group of currencies including the dollar by 16.6 percent between the end of last June and the beginning of February. However, the currency report noted that the yuan's value against the dollar has been essentially flat during the same period.

American manufacturers contend that the undervalued Chinese currency is the biggest cause for the huge trade deficit the U.S. runs with China. They argue that the yuan is undervalued by between 20 and 40 percent against the dollar.

John Engler, president of the National Association of Manufacturers, called the action by the administration a "missed opportunity" to address the problem China's undervauled currency poses for the U.S. and global economy.

Alan Tonelson, an official with the U.S Business & Industry Council, which represents 1,900 mainly family-owned U.S. manufacturing companies, said the failure to cite China as a currency manipulator represented a broken campaign promise on Obama's part.

"His decision not to cite China gives Beijing a green light to keep cheating America's domestic manufacturers and their employees out of earnings and jobs," Tonelson said.

Sen. Charles Schumer, D-N.Y., one of the leaders in the Senate pushing for a tough stance with China, said he understood that the current global economic turmoil made it difficult to cite China at the present time. He said he planned to reintroduce legislation on the issue in Congress.

Geithner said that China had played a constructive role in the current global economic downturn, including advancing an economic stimulus package that he said was second in size only to the program the U.S. is pursuing.

Geithner's statement did not mention recent comments by Chinese officials concerning their worries about the projected increase in America's federal budget deficit, or a suggestion that dollar's position as the world's top reserve currency should be reconsidered.

04-16-2009, 12:19 PM
Typical MO for Zero IMHO. In the end don't take a stance or change anything, by agreeing and supporting BOTH sides of an issue. In this case, "he was against the RMB being pegged to the dollar before he was for it."

04-16-2009, 12:36 PM
I was a US Gubment lawyer doing WTO trade law. There is nothing in the GATT about currency manipulation. Currency dumping or whatever you want to call it does not exist in any law. It is a policy problem, not a legal one.

04-16-2009, 12:43 PM
of currency manipulation.

In the past, the 'leave it alone' camp prevailed here in the States, but Japan was always a big believer in nudging.

We can probably study this for a few days, debate for a few more days and still not be sure.

Thanks for your response.

04-16-2009, 12:54 PM
You can only devalue for so long. Currency manipulation is a classic "beggar thy neighbor" policy but you cannot sustain it in the long run. Yes it makes your exports cheaper but it also makes your imports more expensive and when a lot of commodities are still priced in USD (oil, for one), you harm one sector of your economy for the benefit of another. At the end of the day, you have a structural imbalance and there is always a bill to pay. China does have a lot of dollar reserves so it can keep it up longer than anyone else would be able to but like I said, at the end of the day, you have made a policy choice to benefit one sector of your economy to the detriment of another.

In the early 90s, the USD was weak and the eurozone bitched. US exporters were happy but importers were not. Then the dollar got strong and both the eurozone and US exporters bitched, pissed, and moaned.

04-16-2009, 01:02 PM
One addendum: China is becoming for some industries... sole producer. They can let currency fluctuate later. Easy to pay the bill then.

Good luck finding an alternative.

04-16-2009, 01:30 PM
One addendum: China is becoming for some industries... sole producer. They can let currency fluctuate later. Easy to pay the bill then.

Good luck finding an alternative.

and transport costs were sky high because of the cost of oil, China wasn't so cheap at the end of the day and a lot of companies started to source production out of china. From wiring harnesses to athletic shoes, it was trend. They still cannot make high tech stuff. One Michigan wiring harness maker gave moved its production from Michigan to China and back because the stuff was of such horrible quality that it required sending it out to be remade. This made the cheaper china product twice as expensive as local production at the end of the day.

04-16-2009, 02:02 PM
Going by your timetable we can put it up for a vote on Monday. ;)