Team Obama punts on China currency until mid-November

McClatchy NewspapersOctober 15, 2010 

WASHINGTON — For the second time this year, the Obama administration delayed Friday the release of a report on whether China manipulates its currency, but deflected some of the political heat from angry Democrats by launching an unrelated trade probe.

At issue is whether China deliberately undervalues its currency to make its exports cheaper abroad and imports from other countries more expensive at home. The International Monetary Fund recently said that China's currency, the yuan, is significantly undervalued.

Treasury Secretary Timothy Geithner first delayed a report to Congress about China's currency policies in July, saying he wanted to use several prominent gatherings of world financial leaders to press China to act. Friday, he said he'd delay the report until after Nov. 11-12 meetings involving leaders from the G-20, the 20 most industrialized nations.

Friday's announcement was unexpected in timing but not result.

"I'm not surprised," said Bill Reinsch, the president of the National Foreign Trade Council, a group that promotes open trade and investment policies.

Still, the administration's decision is sure to anger some Democrats, who recently assailed Geithner in hearings and criticized President Barack Obama for abandoning campaign promises to get tough on China. The House of Representatives passed a bill before adjourning to campaign before November's elections that would allow the administration to sanction China if it's deemed a currency manipulator.

Treasury's delay conflicts with the advertising theme that many Democratic campaigns are airing. One high-profile ad criticizes the U.S. Chamber of Commerce for allegedly using foreign money to influence U.S. elections, with wads of Chinese currency in the background of these commercials. That ad loses its sting if the administration isn't willing to say China breaks the rules.

While anti-trade rhetoric is prominent on the campaign trail, there's little evidence that it's a top issue for voters concerned about jobs.

"My gut is this is a tactical error for the president — and I'm a Democrat — because it divides," said Reinsch of the trade council.

Geithner cited progress in announcing his delay.

"Since June 19, 2010, when China announced it would renew the reform of its exchange rate and allow the exchange rate to move higher in response to market forces, the Chinese currency has appreciated by roughly 3 percent against the U.S. dollar," the Treasury chief said in a statement announcing his decision. "Since Sept. 2, 2010, the pace of appreciation has accelerated to a rate of more than 1 percent per month. If sustained over time, this would help correct what the IMF has concluded is a significantly undervalued currency."

Top Democrats publicly ignored the Treasury decision, focusing instead on the administration's decision to accept a U.S. steel workers' complaint that China is unfairly subsidizing its "green technology" sector. The Office of the U.S. Trade Representative will investigate the complaint.

"China is using unfair trade practices to try to dominate the market in solar panels, wind turbines and other products in this important jobs-creating sector and those practices must be vigorously challenged," Rep. Sander Levin, D-Mich., the chairman of the House Ways and Weans Committee, said in a statement.

Ohio Democratic Sen. Sherrod Brown, an outspoken critic of trade policies, also was silent on the currency decision but vocal on the trade action.

"This investigation sends a strong message to China and our trading partners that we will not sit by idly while others corner the market and elbow fair competition out of the way," he said. "China must change its predatory policies. But until China does, we will ensure it plays by the rules it agreed to when it joined the WTO nearly 10 years ago."

The Bush administration's former trade representative, Rob Portman, holds a commanding lead in the Ohio opinion polls and appears poised to join Brown as the Buckeye State's junior senator.

"If it (trade) was a decisive issue, the election would be coming out another way," suggested Reinsch.

ON THE WEB

Geithner statement

China investigation by U.S. Trade Representative

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