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10 out of 10 Economists Agree: We Were Wrong

Treasury Passing the Buck on China

Sector: Industrias Culturales

The New York Times is reporting today that the Obama administration has decided to delay indefinitely its report on currency manipulators because the president of China will participate in a nuclear summit in the United States this month:

Mr. Hu’s visit will take place only two days before the Obama administration faces a deadline to decide whether to label China a “currency manipulator,” meaning that it intervenes in currency markets to gives its exporters an artificial advantage. Pressure in the United States has been building to take that step, which could initiate a Congressional process that would lead to slapping tariffs on Chinese imports.

But given the potential for embarrassing Mr. Hu — and for sending bilateral relations into another tailspin — the administration decided not to report on April 15, one of the deadlines set by Congress and the Treasury Department to issue a report on possible currency manipulation.

To avoid embarrassing Mr. Hu, the Treasury Department could delay the deadline for weeks. “As a practical matter, they’ve got a lot of wiggle room,” said Nicholas R. Lardy, an economist at the Peterson Institute for International Economics in Washington. Mr. Lardy added that he thought it was unlikely that China would have agreed to a visit by Mr. Hu unless there was at least an informal assurance by the Treasury that China would not immediately be named a currency manipulator.

Last Wednesday the House Ways & Means Committee held a hearing on Chinese currency policy in an effort to pressure the administration to designate China a currency manipulator.  Since it appears Treasury will avoid designating China as a manipulator, the ball is back in Congress’s court. 

Last week Senator Schumer said that, regardless of what the Treasury Department decides to do in its mid-April report, he would push for a vote on a bill that would completely overhaul the process for making determinations on currency manipulation so that it would be easier and quicker to take action on China and other countries.  Given that Treasury may decide to miss the deadline altogether, Schumer’s strategy now seems pretty shrewd.

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Don Juan of Austria

This is where trade is linked to all of our other stupid policies. If we didn't have ten million overseas bases, and feel that we needed to be a major regional player in every region of the world, then we could have a sane trade policy for our own country without worrying about whether it makes China (or Europe, or Japan, or Canada, or Brazil, or anyone else) angry.

Still, even if we have to be insanely overextended, that still doesn't justify our suicidal trade policy. One day, our elites will wake up to find out that we don't have the industrial base to support their adventurism overseas.

It's depressing how much our China policy has changed in 15-20 years. Even back in the early 90s, before we would grant normal trade relations with China, we could (legitimately, as a sovereign nation) put EVERYTHING- human rights, Tibet, economic issues- on the table. Now, our craven leaders back down on blatant, directly damaging policies like China's currency, and even after the Chinese government has gone out of its way to humiliate the President.

All it would take is for our policy elites to show (1) some guts to stand up to China (and Europe, and Japan, etc.) and (2) some concern for America's working/middle class and future, and then we could turn things around.

So the outlook is bleak.

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