Thu, Dec 21, 2006 page10

• US position on yuan draws protests

  WEAK VOICE Politicians from both major parties were angered by a treasury report that they said should have taken a stronger stance against Chinese currency policies

  • AFP
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  The US government has drawn a chorus of fierce protests from politics and industry after once again refusing to label China a currency cheat.

  The Treasury Department, in a twice-yearly report released on Tuesday on exchange rate policies, said Chinese currency reforms so far have been "considerably less than is needed" to rebalance world trade.

  But the report, not for the first time, concluded that no major US trading partner meets the "technical requirements" to be labeled a currency "manipulator" under US trade law.

  

  A Chinese customer counts a handful of 100 yuan notes at a local bank in Beijing yesterday. The US government has drawn a chorus of fierce protests from politicians and industry after refusing to label China a currency cheat.

  PHOTO: AFP

  Among incredulous reactions from those who want to see China punished over its trade practices, calls mounted for a new approach to Sino-US economic frictions.

  The report came out just after a top US delegation led by Treasury Secretary Henry Paulson returned from talks in Beijing, which were long on discussion about long-term challenges but short on promises by China of short-term change.

  Beijing's critics say it massages its exchange rate to keep the yuan undervalued and boost Chinese exports, which have flooded US markets as manufacturing jobs have disappeared rapidly.

  As the Democrats prepare to retake control of Congress next month and the US trade deficit with China threatens to hit a record US$240 billion this year, pressure for action looks set to intensify.

  Max Baucus, the incoming Democratic chairman of the Senate's powerful finance committee, promised to find a new approach, arguing the semiannual Treasury reports had outlived their use.

  "We all know China's currency regime needs greater flexibility and market influence. And we all know that delaying these reforms is harmful to China's economy, the US economy, and Sino-American ties," he said.

  Alan Tonelson, research fellow at the US Business and Industry Council, said he was "thoroughly dismayed" at the Treasury finding.

  He noted that Federal Reserve Chairman Ben Bernanke in Beijing last week had called the yuan's undervaluation an "effective subsidy" for Chinese exporters.

  "What do they think it's subsidizing?" Tonelson said in reference to US policymakers. "If we don't think it's a subsidy designed to improve trade flows, then US leaders are simply smoking something funny."

  Democratic Senator Chuck Schumer and his Republican colleague Lindsey Graham led one anti-China charge in the outgoing Congress, but dropped a threat to slap a punitive tariff on Chinese imports to give Paulson's dialogue a chance.

  In light of the latest Treasury report, they signaled in a joint statement that their patience was wearing thin.

  "The administration continues to use technical and legalistic dodges to avoid saying what everyone knows to be true -- the Chinese manipulate their currency. It's as plain as the nose on your face," the senators said.

  "The Chinese cannot be part of the international community on their terms alone. They need to be pressed to play by the rules and that means putting an end to currency manipulation," they said.

  Having shelved their tariffs bill, Schumer and Graham have pledged to work with other senior figures like Baucus to find a consensual approach to taking China to task.

  One bill sponsored by Democrat Representative Tim Ryan and Republican Representative Duncan Hunter would add currency manipulation to the list of unfair trade practices under US trade law.

  By removing the Treasury's authority to designate individual countries, the bill would permit manufacturers to file currency complaints against China with the International Trade Commission.

  "The new Democratic leadership can prove that it's determined to champion the interests of US-based producers, and not outsourcing multinational companies, by moving quickly to pass the Hunter-Ryan bill," Tonelson said.
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