US Trade Representative Robert Zoellick on Wednesday appeared to squash American manufacturers' hopes for the US to challenge China's exchange rate policy at the WTO.
The Bush administration has leaned on China to move to a flexible exchange rate but has resisted taking any stronger action to persuade it to do that.
A coalition of US manufacturers, farmers, and labor groups known as the Fair Currency Alliance wants the Bush administration to challenge China's exchange rate at the WTO.
They claim that Beijing's nine-year-old practice of pegging the yuan at 8.28 to the dollar gives Chinese exporters an unfair trade advantage by artificially depressing the price of their goods by as much as 40 percent.
Leading Democratic presidential candidate Senator John Kerry of Massachusetts also has said he favors using the full powers of the WTO to force China and other Asian economies to move to more flexible currency regimes.
But Zoellick said he did not think China's pegged exchange rate violated the WTO.
"There's really no WTO obligation not to have a fixed exchange rate," Zoellick told reporters before giving a speech to the Asia Society. "You will recall the United States had a fixed exchange rate until 1971, when we were a member of the GATT," the predecessor organization to the WTO.
The National Association of Manufacturers and other members of the Fair Currency Alliance plan to file a "section 301" petition in coming weeks to ask Zoellick's office to investigate whether a case could be brought against China's currency practices at the WTO.
The petition, if accepted, also would raise the possibility of US economic sanctions to persuade China to move to a more flexible currency regime.
The groups claim that China's currency peg violates Article IV of the General Agreement on Tariffs and Trade (GATT), which they say bars countries from manipulating their currencies to sidestep free-trade commitments.
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