US heat is on China’s “under-valued” currency
Obama's pro trade allies battle claim China boosts exports by keeping it artificially low.
WASHINGTON — Supporters of President Barack Obama’s trade agenda are battling opponents’ demands to bar China from keeping its currency value artificially low, a way to subsidize exports.
They say it’s not clear that China still manipulates its currency. And even if it does, they say, the multinational trade talks now underway are the wrong venues for addressing the matter.
China isn’t a party to the pending 12-nation Trans-Pacific Partnership deal that Obama hopes to send Congress this year. Moreover, US trade advocates say, new international crackdowns on currency manipulation could backfire by drawing unwanted attention to Federal Reserve policies.
Insisting on confronting China’s currency practices could “wreck our trade agenda,” said Tony Fratto, a former Republican White House spokesman and Treasury official now working for pro-trade groups.
Low-valued currency can boost a country’s exports, by making its products more affordable to foreigners. Various groups have accused China, especially, of manipulating its currency over the years.
Some now want to inject the issue into the Pacific Rim trade deal debate, even though China isn’t covered by the pact being negotiated.
Democratic Sen. Chuck Schumer of New York says he won’t support the Pacific Rim agreement “if we do not at the same time enact new statutory law that includes objective criteria to define and enforce against currency manipulation” in China and elsewhere.
Republican Sen. Lindsey Graham of South Carolina concurs.
“I believe there is bipartisan opposition to any trade agreement that doesn’t deal with currency,” Graham told reporters last month.
There’s widespread debate, however, about how much China benefits, if at all, from manipulating its currency.
Last May, economists at the Peterson Institute for International Economics examined The World Bank’s latest global pricing estimates and concluded China’s currency was no longer undervalued. “This estimate is of potential historic significance,” they wrote.
Jerry Jasinowski, an economist and past president of the National Association of Manufacturers, says the US should have opposed China’s currency policies more aggressively years ago, but not now.
“Whatever advantage China and others gained from currency manipulation is now spent,” he wrote in the Huffington Post. US manufacturing jobs are expanding, Jasinowski wrote, and “foreign currencies are losing value against the dollar.”
Moving aggressively against China’s currency now, he said, “would amount to a cure worse than the disease.”
US Trade Representative Michael Froman said in an interview that the Obama administration has pushed China for six years “to move toward a more market-oriented exchange rate, with some success…. On a trade-weighted basis, most economists and the (International Monetary Fund) now think that it’s not significantly overvalued or undervalued.”
Several top U.S. officials also warn that renewed emphasis on currency manipulation could draw unwelcome attention to the US itself.
“Be careful what you wish for,” University of Maryland economics professor Phillip Swagel told reporters on a conference call organized by Fratto.
To help the US economy withstand the “great recession” that began in 2007, the Federal Reserve bought large amounts of assets from commercial banks. One result was to keep the dollar’s value lower than it otherwise would have been. To many, that’s currency manipulation.
The currency debate will grow louder in coming weeks as pro-trade lawmakers and advocacy groups push two proposals in Congress.
One, known as “fast track” or “trade promotion authority,” would give Obama a power that recent presidents have enjoyed: to negotiate trade agreements that Congress can ratify or reject, but not amend. Congress can, however, spell out “negotiating objectives” for the talks.
If Congress grants him fast-track powers, Obama is likely to move on the Trans-Pacific Partnership trade deal involving the United States, Japan, Canada, Mexico, Vietnam and seven other nations.
Many labour unions, liberal lawmakers and some environmental groups oppose both trade initiatives. Many business organizations and Republican leaders support them.