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U.S. delays currency report before meetings with China

WASHINGTON — The Obama administration is delaying a report to Congress on currency policies amid calls from some lawmakers that it should cite China as a currency manipulator harmful to the U.S. economy.

Treasury Secretary Timothy Geithner said Saturday that he will delay publication of the report, due April 15, because several high-level international meetings in the coming months will be a better way to advance the United States' position.

Still, Geithner said in a statement that China should adopt "a more market-oriented exchange rate" to balance the U.S. trade deficit with China, which totaled $226.8 billion last year — the largest imbalance with any country. Geithner's announcement came a day after the White House signaled an improvement in relations between the two countries amid news that Chinese President Hu Jintao will attend a summit on nuclear security later this month in Washington. President Barack Obama told the Chinese leader during an hourlong phone call that he welcomed the decision.

The delay of the Treasury report could be designed to avoid embarrassing the Chinese at a time the administration is enlisting their aid on sensitive issues of nuclear security and Iran's nuclear program. Hu is scheduled to attend the summit the same week that the report normally is due.

The administration is hoping that China will again allow its currency to rise in value against the dollar as a way of narrowing the trade gap — as it did until mid 2008 when the global recession began to cut sharply into China's exports abroad.

In his statement, Geithner said "there are a series of very important high-level meetings over the next three months that will be critical to bringing about policies that will help create a stronger, more sustainable, and more balanced global economy." They include a meeting of the Group of 20 rich and developing nations in Washington this month, and a strategic and economic meeting with China in May.

"I believe these meetings are the best avenue for advancing U.S. interests at this time," Geithner said.

Two weeks ago, a group of 130 House members sent a letter to the administration urging a citation of China as a currency manipulator. The lawmakers also called on the Commerce Department to impose trade sanctions on China on the basis that its currency system is an unfair trade practice.

In addition, 14 senators unveiled legislation calling for stiff trade sanctions against China if it doesn't let the yuan rise in value against the dollar.

China rejected the pressure from U.S. lawmakers and accused Washington of trade protectionism that Beijing said could hurt the global economic recovery. China insists it is not intentionally pursuing a trade surplus.

Why currency policy matters

U.S. manufacturers say China's yuan is purposely undervalued by as much

as 40 percent and is a big reason for the massive

trade deficit with the

United States. An undervalued yuan vs. the dollar makes U.S. products more expensive in China, inhibiting U.S. exports and depressing job growth, while making Chinese goods less expensive for Americans, encouraging the trade deficit.

U.S. delays currency report before meetings with China 04/03/10 [Last modified: Saturday, April 3, 2010 10:26pm]
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