China key to unlocking US trade agenda

By: | at 07:00 PM | Channel(s): International Trade  

U.S. President Barack Obama may have to first tackle concerns about China’s trade and currency practices if he is serious about moving forward on free trade pacts with South Korea, Colombia and Panama.
With U.S. unemployment hovering near 10 percent and congressional elections looming in November, Democratic leaders are reluctant to schedule votes this year on the accords.
The deals, negotiated under former President George W. Bush, are unpopular with many Democrats who believe previous pacts such as the North American Free Trade Agreement are to blame for millions of lost U.S. manufacturing jobs.
Obama might be able to change that dynamic with a plan to address what many lawmakers see as the United States’ No. 1 trade challenge: competition from China.
If Obama can demonstrate he is serious about addressing China trade concerns, it could give Democratic leaders the political cover they need to take up the agreements.
Obama reiterated his commitment to fixing problems blocking approval of the three trade deals in the president’s annual trade agenda report on Monday, prompting Republicans to urge him to follow through with concrete steps.
April Report
Both Democrats and Republicans are looking for Obama to spell out how he will deal with China’s currency between now and April 15, when the Treasury Department issues its next semi-annual report on foreign exchange rate practices.
Analysts see a vigorous debate on that issue going on within the Obama administration and expect a final decision will not be made until just before the report is released.
Western economists estimate China’s yuan is undervalued by anywhere from 20 percent to 40 percent, giving Beijing an unfair advantage in international trade.
China, which has maintained the yuan at 6.83 to the dollar since July 2008, says it policy is an internal matter aimed at promoting stability and growth.
During the presidential election campaign, Obama criticized Bush for not labeling China a currency manipulator. However, in his first two stabs at the semi-annual report, Obama also shied away from the politically explosive term.
That decision may have been defendable to avoid alienating China at a time when cooperation between the two countries was seen as key to helping restore global economic growth.
But economists says China’s continued refusal to raise the value of its currency hurts many developing countries that rely on exports for growth, not just the United States.
Some, such as Simon Johnson, a former chief economist at the International Monetary Fund, are openly urging Obama to cite China for currency manipulation.
That designation would likely inflame trade relations with China, but carries no specific penalty.
Instead, it would require U.S. Treasury Secretary Timothy Geithner to promptly begin negotiations with China on its exchange rate unless he decides that would have a detrimental effect on U.S. economic and security interests.
A bipartisan group of 15 U.S. senators last week urged Commerce Secretary Gary Locke to use U.S. anti-subsidy trade laws to fight China’s currency practices on a case-by-case basis.
The Commerce Department is reviewing that possibility in a case involving coated paper imports.
Considering WTO Compliant
U.S. Trade Representative Ron Kirk, during his confirmation hearing last year, also told senators his office would look at the viability of bringing a World Trade Organization complaint case against China for currency manipulation.
As recently as last month, U.S. trade officials said that possibility remains under review. Such a case would be the first of its kind under the WTO.
The trade office also could announce other cases against China in coming weeks when it is expected to unveil the results of an inquiry into “non-tariff barriers” that keep out U.S. farm and manufactured goods exports.
Democrats believe Bush did not do all he could to make sure Beijing honored commitments it made when it joined the WTO.
Even with

American Journal of Transportation