Geithner testifies; U.S. and China continue negotiations on currency policies
Friday, June 11, 2010
Negotiation with China has failed to produce a clear sense of when the country might change its controversial currency policy, Treasury Secretary Timothy F. Geithner said Thursday, as new trade data produced disappointing results for the Obama administration's export efforts and congressional leaders renewed calls for a tougher stance with Beijing.
President Obama has made increasing exports a centerpiece of his economic policy, aiming to double the United States' overseas sales in the next five years and create millions of new jobs in the process.
Newly released information from the Commerce Department, however, showed that exports dropped slightly in April, indicating that the United States may not benefit from the quick and seamless rebound in exports that some analysts expected to flow from a global economic recovery. The department said that exports in April fell to $148.8 billion, from $149.8 billion the month before. Agricultural sales ebbed and purchases of U.S. goods in Europe declined, possibly pushed lower by the steep drop in the value of the euro.
Though exports are still up significantly from the recession-lows of a year ago, the trade data formed the backdrop of renewed debate on Capitol Hill over China's currency management.
The U.S. trade deficit with China widened 14 percent in April, to $19.3 billion, compared with $16.9 billion in March, driven by a surge in imports and a fall in sales to China by American companies. China keeps its currency, the yuan, pegged at an artificially low level to the dollar, a policy that many economists and lawmakers argue has cost the U.S. hundreds of thousands of manufacturing jobs by making Chinese goods cheap on world markets.
In April, Geithner delayed a biannual report on world currency policies in which he was urged to label China a currency manipulator and take measures against the country. He said then that he wanted to use upcoming meetings with the Chinese to resolve the issue, but with that timeline almost expired, Geithner said Thursday that he had no idea when the Chinese might act.
"To be honest, I don't know whether we are at the point where we are going to see meaningful progress in the short term," Geithner told the Senate Finance Committee. Top Chinese officials say they agree the yuan should appreciate -- a rise in the currency's value would help restrain inflation and wage increase demands in the country, and boost China's appetite for imports in line with recommendations from a broad array of analysts. But, Geithner said, "They have not decided when and how they are going to act."
Top U.S. and Chinese officials met last month and will be together at the Group of 20 summit of large economies this month. Geithner said the United States will "take stock" of what to do next after the G-20 meeting.
By then, lawmakers may take matters into their own hands. The threat of congressional action on currency policy has been used in past U.S.-China negotiations to jog loose concessions, and Sen. Charles E. Schumer (D-N.Y.) raised the possibility again.
Schumer has offered legislation that would tax Chinese imports because of the country's undervalued currency, and he told Geithner the Senate was "going to do it soon. Be prepared."
The issue is not just a U.S. concern. China's undervalued currency -- and the massive trade surplus and stockpile of currency reserves it has accumulated as a partial result -- is considered a potential risk for the global economy as the country undercuts development in other low-wage manufacturing countries such as India and Vietnam, and it prompts competitors such as Malaysia and Singapore to manage their currencies closely as well.
The country's development policy remains oriented around exports, and recent events may have made the leadership in Beijing more cautious about any sharp appreciation in the yuan's value. While China's exports are surging overall, the drop in the value of the euro has made Chinese goods more expensive in that key market.