- The Washington Times - Friday, October 1, 2004

ASSOCIATED PRESS

The Bush administration is trying to step up pressure on China to overhaul a currency system that American manufacturers contend gives Chinese companies a huge competitive advantage.

The administration yesterday moved into a second day of talks with a high-level delegation of Chinese officials. Several members of Congress say the Chinese are dragging their feet and they believe it is time to file an unfair-trade case.

The dispute involves China’s system of pegging the value of its currency, the yuan, tightly to the U.S. dollar. American manufacturers say that practice keeps the yuan undervalued by as much as 40 percent, giving Chinese companies a huge price advantage over American products.

Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan began talks Thursday with a group of Chinese officials led by Finance Minister Jin Renqing.

The Chinese last night were the special guests at a dinner meeting of the Group of Seven leading industrial countries — the United States, Japan, Germany, France, Britain, Italy and Canada.

It was the first time China has attended a G-7 meeting and it could mark the beginning of a process in which China is eventually admitted to the group or at least the expanded Group of Eight, which also includes Russia.

However, eight senators and 22 House members complained Thursday that China should be forced to immediately stop manipulating its currency to gain trade advantages. They called on the administration to bring a case against China before the World Trade Organization, which could lead to trade sanctions against Chinese goods.

Sen. Charles E. Schumer, New York Democrat, said the administration’s attempts to use quiet diplomacy have proved to be a failure and tougher action was required.

“It is time to bring out the big stick and enforce U.S. trade laws,” Mr. Schumer said.

The lawmakers pointed to a U.S. trade deficit with China that hit $124 billion last year, the highest ever recorded with any country, and is running at an even higher annual rate above $140 billion this year.

Rep. Sander M. Levin, Michigan Democrat, said China’s currency system was “literally shutting down family businesses that have been employing people for generations.”

The issue has also arisen in the presidential campaign. Democratic nominee Sen. John Kerry charges that the Bush administration has failed to do enough to attack China and other sources of unfair foreign competition at a time when the country has seen the loss of nearly 2 million manufacturing jobs.

However, Mr. Snow’s spokesman Rob Nichols said the administration believes China has taken a number of positive steps in the past year to prepare its economy for a floating exchange rate. Chinese officials have said their goal is to allow the yuan’s value to be set in open markets, but it needs time to make sure that a floating currency does not destabilize its economy.

China was just one of the issues on the agenda for yesterday’s meeting of G-7 finance ministers and central bank presidents. The group was also going over the topics that will be taken up at the weekend meetings of the 184-nation International Monetary Fund and its sister lending agency, the World Bank.

Those talks were expected to focus on such topics as helping war-torn Iraq rebuild and providing greater debt relief to the world’s poorest countries.

In a speech Thursday, Mr. Snow called for significantly expanded debt relief for poor nations and said the World Bank should focus more on grants, which do not have to be repaid, rather than loans.

While Mr. Snow did not provide any details, international debt relief groups said the United States is pushing a proposal that would drop requirements for the world’s poorest nations to repay loans. But they said the U.S. proposal does not specifically provide for greater resources to pay for the debt relief.

By contrast, a proposal introduced this week by British Chancellor of the Exchequer Gordon Brown would have a portion of the debt relief paid through revaluing IMF’s massive gold reserves and by individual contributions from wealthy countries.

The finance meetings, scheduled to run through tomorrow, were being held under heavy security following the revelation in August that both the IMF and World Bank headquarters were on a list of terrorist targets.

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