Asian currencies’ edge in trade draws Hill ire

Congressional leaders are calling on the Bush administration to confront China and other Asian countries that artificially depress their currencies to gain a competitive advantage over American exporters, causing job losses in the United States.

They raise a delicate issue, however, since Asian countries recently have done much to finance the United States’ record trade and budget deficits by investing the dollars they earned selling exports to this nation back into U.S. Treasury bonds and other securities.

“It is time for the U.S. government to get serious with countries who tamper with their currencies to give their companies an unfair advantage over U.S. manufacturers,” said Rep. Donald Manzullo, Illinois Republican and chairman of the House Small Business Committee.

“These actions are obvious violations of the World Trade Organization and International Monetary Fund, and these countries must be held accountable,” Mr. Manzullo said.

Mr. Manzullo and Senate Small Business Committee Chairman Olympia J. Snowe, Maine Republican, asked the General Accounting Office on Wednesday to investigate currency manipulation by China, Japan, South Korea and Taiwan, and the effect on the U.S. economy.

China since 1994 has fixed its currency, the yuan, at 8.3 to the dollar, while the other Asian countries officially let their currencies float. But all the Asian central banks secretly intervene in the currency markets to prop up the dollar and in doing so have accumulated huge amounts of U.S. dollars and securities estimated at more than $1 trillion.

Currency manipulation by China “is particularly disconcerting,” Mrs. Snowe said, “as China recently became a member of the World Trade Organization, whose inherent purpose is to ensure free and fair trade.”

China’s fast-growing trade surplus with the United States surpassed Japan’s last year to become the largest. This huge trade surplus is the biggest sore point for U.S. manufacturers, prompting a bipartisan group of senators last week to urge Treasury Secretary John W. Snow to engage China in negotiations intended to remove its artificial ceiling on the yuan.

“The yuan is being artificially undervalued, and this undervaluation may be contributing to the significant job loss the United States has seen in its manufacturing sector,” the senators said.

Manufacturing has been the weakest spot in the U.S. economy for two years, and the layoff of more than 2.6 million manufacturing workers weakened the broader economy.

The four senators — Charles E. Schumer, New York Democrat; Elizabeth Dole, North Carolina Republican; Evan Bayh, Indiana Democrat; and Lindsey Graham, South Carolina Republican — represent states with big manufacturing and textile industries.

“Many manufacturing jobs are moving overseas” as low exchange rates and wage rates increasingly entice businesses to locate in China, they said. As a result, China has enjoyed high growth rates fueled by booming exports, which account for almost a quarter of the United States’ $460 billion trade deficit.

Because it might help put a lid on U.S. job losses, a change in China’s policy would be politically advantageous to President Bush. The treasury secretary openly has urged China to switch to a more flexible exchange rate, which economists estimate would raise the value of the yuan 5 percent to 50 percent.

“I’m encouraged from things we’re hearing from the Chinese that they’re willing to widen their peg,” Mr. Snow said in an interview Tuesday with CNBC. “That would be helpful.”

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