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Penalties sought for China over currency practices
Geithner urged to act against exchange rate, trade policies
Accusing China of stealing U.S. jobs through “egregious” trade practices, legislators demanded action from the Obama administration Thursday and called for bipartisan legislation giving the Treasury ammunition to penalize China for using an artificially low exchange rate to gain an advantage in trade.
Top House Democrats said they would like to pass such an anti-China trade bill in coming weeks, prompting China to warn that the strategy would not work and might backfire. But the Asian giant also recently accelerated the rate of appreciation of its currency, the yuan or renimbi, in response to growing pressure from Congress.
“Appreciation of the renimbi will not solve the U.S. [trade] deficit and employment problems,” a Chinese Foreign Ministry spokesman said in response to a chorus of charges from both parties in Congress. “On the contrary, it could have the opposite effect.”
While taking his toughest stance to date on China’s need to speed up the pace of currency reform, Treasury Secretary Timothy F. Geithner echoed China’s point that doing that by itself will not eliminate the gigantic $230 billion trade deficit with China or restore millions of manufacturing jobs lost in the recession.
Americans also must save more and invest more while consuming less of the world’s bounty, he said, to bring a better balance to trade.
Mr. Geithner also pointed out that the U.S. is enjoying “huge gains” from exporting to China, the fastest growing U.S. export market, and needs to weigh that against worries about jobs. China already has purchased $53 billion in U.S. goods made by American workers so far this year, he said.
“We share your frustration” in wanting a less glacial pace of reform in China, Mr. Geithner told the Senate banking committee, pledging to use “all the tools available” to the administration to pursue unfair trade practices.
But he emphasized that any legislation must be designed to be effective in prodding China forward rather than raising the “risk” of retaliatory action against the U.S. and its businesses. It also must comply with all international trade treaties, he said.
In light of those requirements, Mr. Geithner gave a cool reception to the leading House bill, which would empower the administration to levy tariffs on Chinese goods in retaliation for keeping its currency artificially low.
Many businesses have warned that the measure might start a trade war with China. Mr. Geithner said the administration is still studying the measure, which is pending before the House Ways and Means Committee.
Mr. Geithner’s cautious stance and China’s prickly reaction appeared to give legislators pause in their drive to enact the bill before congressional elections. They plied Mr. Geithner to detail changes that would make the bill more effective and less risky.
Mr. Geithner said he’ll work with legislators to come up with a better bill, but added that it would be a difficult balancing act and might be hard to accomplish. He said any legislation is sure to be challenged before the World Trade Organization and could get thrown out.
“I’m not arguing for patience” and diplomacy rather than congressional action, he said, but “we need to have confidence it will work.”
The Treasury secretary noted that most other nations agree with the U.S. that China needs to reform, and are also pressing China to rely more on domestic consumption rather than exports for growth, while allowing its currency to rise against the dollar.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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