- The Washington Times - Wednesday, October 1, 2003

ASSOCIATED PRESS

The Bush administration, saying it is doing everything possible to halt the loss of manufacturing jobs, assured Congress yesterday it was pressing China to move to a flexible currency system and dismantle barriers to U.S. exports.

Treasury Undersecretary John B. Taylor, the top U.S. official on international economic issues, told a House Financial Services subcommittee that the administration is maintaining pressure on China to honor commitments it made when joining the World Trade Organization.

“China represents one of the largest economies in the world, and a flexible exchange-rate regime would be a good policy for China,” Mr. Taylor told lawmakers.

Mr. Taylor said that Treasury Secretary John W. Snow, during a trip to Beijing last month, had made this argument in what Mr. Taylor described as “detailed and candid” conversations.

The Chinese, however, rejected Mr. Snow’s appeal, arguing that now was not the right time to allow their currency, the yuan, to float because of the dangers to China’s fragile banking system. Since 1994, China has tightly pegged the yuan to movements in the dollar.

American manufacturers say the yuan is undervalued by as much as 40 percent against the dollar, giving Chinese companies a huge advantage over U.S. companies.

After the talks, Mr. Snow said the administration planned to keep pursuing the issue and that President Bush would raise the matter at an upcoming meeting with Chinese President Hu Jintao.

Mr. Bush said this week his administration would pursue “fair trade for American manufacturers” including an effort to “make sure that China’s got a monetary policy which is fair.”

Mr. Taylor said the United States planned to press China not only to allow the yuan’s value to be set by market forces but also to move more quickly to relax trade barriers keeping products from the United States and other countries out of the fast-growing Chinese market.

“It is important for China to fully implement and even surpass the commitments it made to the World Trade Organization,” Mr. Taylor told the House panel. “It should also open its markets to agricultural products such as soybeans as well as effectively enforce intellectual property values.”

WTO rules bar countries from manipulating their currency to gain an export advantage. China joined the organization in December 2001.

The administration, seeking to show that Mr. Bush is doing everything possible to deal with a sluggish U.S. recovery, has moved in recent months to respond to criticism from American manufacturers about China’s trade practices.

The U.S. trade deficit with China topped $100 billion last year and could set a record of $120 billion or more this year.

Franklin J. Vargo, vice president for international affairs at the National Association of Manufacturers, told the subcommittee that the trade deficit with China could reach “critical proportions” if not addressed soon.

More than 60 members of the House are promoting legislation that would penalize Chinese goods imported to the United States by an amount equal to the level by which the administration determines the yuan is undervalued against the dollar.


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