WASHINGTON, D.C. - Despite record-high trade deficits and mounting reserves of currency the US Department of the Treasury today failed to label China a “manipulator" of its currency. Treasury delayed the release of the semi-annual report, which under statute was due in April, until after the recent US-China dialogue on trade and economic issues in Washington. The Administration has faced growing pressure from Congress, business leaders and American workers to enforce the rules of trade and challenge China’s currency policies.
“The Constitution gives Congress the authority to regulate international trade and it is the Administration’s role to implement that policy," said Ways and Means Chairman Charles B. Rangel (D-NY). “The recent US-China dialogue was an abrupt attempt at discussion and progress on very serious issues such as Chinese currency manipulation. We made it clear during this exchange that we do not believe China abides by the rules of trade and therefore we are prepared to consider strong, effective legislation to address these violations and stand up for American workers, farmers and businesses."
“Treasury’s claim that it was “unable to determine that China’s exchange rate policy was carried out for the purpose of preventing effective balance of payments adjustment or gaining unfair competitive advantage in international trade" is the kind of dodge that gives this Administration no credibility with American businesses and workers disadvantaged by China’s persistent currency manipulation." said Trade Subcommittee Chairman Sander M. Levin (D-MI). “That is why we intend to take prompt legislative action in Congress and urge the Administration to act on our recent Section 301 petition against China’s currency manipulation."
Background on the Treasury Report and China Currency:
If the Treasury report had labeled China a currency “manipulator," the Secretary of the Treasury would then enter into negotiations with China to ensure the “regular and prompt" adjustment of Chinese exchange rates to eliminate any unfair advantage provided.
In a report issued in October 2003, the Treasury Department expressed concern that China’s foreign exchange reserves rose to $346 billion, up 43 percent from the previous year, as a consequence of keeping its currency undervalued. Treasury stated that “Secretary Snow stressed the desirability of China’s moving to a flexible market-based exchange rate regime and reducing controls on capital flows."
In May 2005, Treasury stated that “it is now widely accepted that China is now ready and should move without delay [to a market-based flexible exchange rate]." By that time, China’s foreign exchange reserves were $610 billion.
In November 2005, Treasury noted that Chinese authorities had promised to enhance the flexibility and strengthen the role of market forces in their managed floating exchange rate regime. Treasury stated that “the Chinese authorities should do so by the time this report is next issued." At that point, China’s reserves had increased to $711 billion. China failed to make any real change in its regime by the time the next report was issued.
In the report issued today, Treasury states that China’s reserves now exceed $1.2 trillion. Treasury states that “China continues to take steps, though at a slow pace, aimed at reforming currency and monetary policy to eventually move towards a more freely-tradable and market-determined exchange rate.
By artificially maintaining its currency at a level estimated to be 15 to 40 percent below its appropriate value, China subsidizes its exports to the United States while also imposing a direct cost on U.S. exporters to China. This undervaluation violates several of China’s obligations as a member of the World Trade Organization (WTO). China’s continued manipulation also provides Chinese businesses with an unfair trading advantage, hurting U.S. workers, farmers and businesses and contributing to the massive and still growing trade deficit between the U.S. and China.
