The administration of US President Barack Obama is signaling it plans to take a tougher stance with China on trade issues, including demanding that Beijing move more quickly to reform its currency system.
As part of that new approach, the administration filed two new trade cases against China before the WTO and US Treasury Secretary Timothy Geithner said China must move faster to allow its currency to rise in value against the US dollar.
In testimony prepared for two congressional hearings yesterday, Geithner criticized a variety of Chinese economic policies, from Beijing’s currency system to what he said was rampant piracy of US products and the erection of numerous barriers that prevent US companies from operating in China.
“We are very concerned about the negative impact of these policies on our economic interests,” Geithner said in testimony prepared for hearings of the Senate Banking Committee and the House Ways and Means Committee.
His comments come at a time of growing US unhappiness with Chinese economic practices, which critics contend have led to huge US trade deficits with China and the loss of millions of US manufacturing jobs over the past decade.
Lawmakers in both the Senate and the House, responding to voters unhappy with painfully high unemployment in the US following a deep recession, are pushing legislation that would expand the government’s power to impose trade sanctions on China.
Geithner, while not endorsing the new legislation, said the administration was committed to “using all tools available to ensure that American firms and workers can trade and compete fairly with China.”
On Wednesday, US Trade Representative Ron Kirk announced that the administration was filing two new trade cases against China before the Geneva-based WTO, which oversees the rules of global trade.
In one of the WTO cases, the administration said China was discriminating against US credit and debit card companies in favor of a state-owned financial services firm. The other case contended that China had improperly imposed trade sanctions on a type of US-made flat-rolled steel used in electric transformers, reactors and other types of power-generating equipment.
The two trade cases filed by Kirk’s office could lead to retaliatory US sanctions against Chinese products if the WTO rules in favor of the US complaints.
US manufacturers contend that China’s currency is undervalued by as much as 40 percent, making Chinese goods cheaper in the US market and US products more expensive in China.
In his prepared testimony, Geithner said the administration is considering what tools it might use to push China to move more quickly to allow its currency to appreciate in value against the US dollar.
“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,” he said.
The Obama administration, like the previous administration of George W. Bush, has preferred to pursue a course of quiet diplomacy with China, believing that would produce greater results than direct confrontation with the Chinese.
However, Geithner’s remarks indicate that policy may be changing.