Senators grill Geithner on China trade policy
Thursday, September 16, 2010; 1:23 PM
Treasury Secretary Timothy F. Geithner on Thursday signaled a tougher line on China as senators from both parties expressed frustration with the administration's reliance on negotiation in dealing with China's currency and trade policies.
At a hearing of the Senate banking committee, chairman Christopher Dodd (D-Conn.) told Geithner that "a disturbing pattern of behavior has emerged" with China and that "it is time to move beyond just talking."
"There is no question that the economic and trade policies of China present roadblocks to our recovery," Dodd said.
Sen. Richard Shelby (R-Ala.) wondered, "Why is the administration protecting China by refusing to designate it as a currency manipulator?"
Geithner said that he is studying a "mix of tools" to persuade China to change how it manages its currency and to treat U.S. businesses more fairly.
Using language more sharply critical of China than has been the norm for the Obama administration, Geithner noted the "substantial challenges" posed for the United States by an array of Chinese policies, which he criticized as having a "negative impact . . . on our economic interests."
China "encourages outsourcing of production and jobs from the United States. And it makes it more difficult for goods and services produced by American workers to compete with Chinese-made goods and services in China, the United States and third countries," Geithner said. "We need a more balanced economic relationship. This is imperative for us, but it is important to China as well."
In China on Thursday, Foreign Ministry spokeswoman Jiang Yu rejected criticism of the country's currency controls.
"The appreciation of the renminbi can't solve the trade deficit with China," Jiang said, according to the Associated Press. "Pressure cannot solve the issue. Rather, it may lead to the contrary."
Geithner's remarks did not detail the steps being considered to intervene in the currency debate. The United States would potentially have a variety of tools at hand, such as complaints with the World Trade Organization, a more aggressive application of U.S. law or even the crafting of punitive legislation, a step favored by some in Congress.
But the change in tone is significant, highlighting frustration with the resurgence of China's trade surplus with the United States, as well as the increasing sensitivity of economic issues before the midterm elections.
Trade between the two countries has become a pillar of the world economy, but the steady imbalance - the U.S. trade deficit with China is about $200 billion a year - is considered a problem. China has been widely encouraged to change its export-promotion policies, just as the United States has been urged to trim its reliance on debt.
Obama wants to promote U.S. exports to generate jobs and ease the trade imbalance, but many economists and analysts argue that the administration's goals will be difficult to meet without better access to China's large and rapidly growing economy.
In particular, they cite China's management of its currency as a central problem that keeps Chinese goods cheap on world markets, robs Chinese consumers and companies of purchasing power they might use on imported goods, and helps feed its large trade surplus.
Geithner has said that he agrees China's currency is undervalued but that he prefers to deal with the matter through diplomatic channels, and he has specifically avoided mention of possible retaliation under U.S. or WTO laws.
His latest statements are a marked departure. In October, Geithner is to issue Treasury's biannual review of currency manipulation around the world, and he said he would take particular stock of the renminbi's lack of movement on world currency markets.
He postponed the last edition of the report in deference to talks with the government in Beijing, and China subsequently promised to allow the renminbi to float more freely.
Since then, Geithner noted, the renminbi has hardly changed in value and by some measures has weakened- making Chinese exports cheaper still.
"We are concerned, as are many of China's trading partners, that the pace of appreciation has been too slow and the extent of appreciation too limited," Geithner said. "We will take China's actions into account as we prepare the next Foreign Exchange Report. And we are examining the important question of what mix of tools, those available to the United States and multilateral approaches, might help encourage the Chinese authorities to move more quickly."