U.S. flip-flops on labeling China a currency 'manipulator'
Upon further review, as they say in the NFL, Treasury Secretary Timothy F. Geithner has decided that China doesn’t manipulate its currency for trade purposes.
Not surprisingly, U.S. manufacturing groups aren’t happy with Geithner’s about-face.
From Bloomberg News:
In its first semiannual report on foreign-exchange policies since Geithner became secretary, the Treasury said that while the yuan remains "undervalued," no country "met the standards" for illegal currency manipulation during the period of the report, from July 2008 through December 2008.
The conclusion clashes with Geithner’s Jan. 22 statement to a Senate panel that President Barack Obama "believes that China is manipulating its currency." Today’s shift may anger U.S. lawmakers, companies and trade unions who have sought measures to punish nations perceived to have undervalued exchange rates.
"Clearly the Treasury has made more of a political decision than an economic decision here," Republican Sen. Lindsey Graham of South Carolina said in a Bloomberg TV interview. "The truth is the Chinese manipulate their currency."
Everyone knows that China "manages" its currency. The government has allowed the yuan to slowly strengthen from 8.2 per dollar in 2005 to 6.8 now. U.S. manufacturing groups say China still is keeping the yuan too weak, which in turn keeps Chinese exports cheap for U.S. consumers.
But everyone also knows that the U.S. needs China to remain willing to hold record sums of U.S. Treasury debt, as federal borrowing soars. Labeling your chief creditor a "manipulator" would be a classic case of biting the hand that fills your coffers with cash.
Still, the 1,900-member U.S. Business and Industry Council condemned the administration’s flip-flop.
"This report breaks the major commitment candidate Obama made last year to fight Chinese exchange rate protectionism effectively by endorsing the strongest currency manipulation bill proposed in Congress," said Council Research Fellow Alan Tonelson."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."
The Alliance for American Manufacturing was gentler on the administration, saying the Treasury report was "perplexing."
But Alliance Executive Director Scott Paul was no less harsh than Tonelson on China, calling the nation’s currency policy "the most protectionist, trade-distorting and mercantilist practice by any of the G-20 nations. The U.S. should lead the way in ensuring that China honor the commitments it made to gain access to the U.S. market and the rules-based trading system."
-- Tom Petruno
Photo: Treasury Secretary Timothy F. Geithner. Credit: Jay Mallin / Bloomberg News