Congress presses Geithner on China currency
Democratic and Republican senators alike pilloried Treasury Secretary Timothy Geithner on Thursday for refusing to label China a currency manipulator, and for ignoring a congressional mandate to issue a report on China’s exchange-rate practices.
Few issues spark bipartisan agreement in Congress like criticism of administrations for refusing to get tough with China over its fixed exchange rate. Critics charge that China sets the yuan at an unfairly low rate against the U.S. dollar, making American products more expensive in China and Chinese products cheaper here, exacerbating the U.S. trade deficit and holding down U.S. export-driven jobs.
“I’m not sure what this administration’s policy is … and I don’t see a China economic framework,” complained Senate Finance Committee Chairman Max Baucus, D-Mont., adding that federal agencies lack a cohesive strategy for dealing with China.
The top Republican on the panel, Iowa Sen. Charles Grassley, needled Geithner about earlier remarks from President Barack Obama — made during Geithner’s confirmation hearings — that he thought that China manipulated its currency to get a home field advantage. The Treasury chief repeatedly dodged questions about whether Obama still thinks that.
“So what does President Obama believe? You’ve had discussions with him,” an exasperated Grassley asked, failing to get a firm answer.
Geithner repeatedly responded that the Obama administration is pressing China to level the playing field by opening its markets to international trade. He said that pressure from the U.S. government and others had helped China agree to modify its “indigenous innovation” policy, which protected some of its domestic manufacturers from competition but harmed U.S. exports and American firms that operate in China.
“This is a global issue, not simply an American issue … so we’re trying to do everything we can to maximize the odds of them moving sooner, and that’s what’s guiding” policy, Geithner said.
Exports of U.S. goods to China in the first three months of 2010 increased almost 50 percent over the same period last year, he said, adding that exports to China, the third-largest destination for U.S. goods abroad, are about 20 percent above where they were before the recession began in December 2007.
“A huge part of what we sell to China is real things you can see. … It’s steel, airplanes, technology, it’s across the American economy,” Geithner said.
The Treasury Department was supposed to report to Congress by April 15 on whether it considers China a currency manipulator, a designation that would allow the United States to take retaliatory action. However, Geithner announced on April 3 that he’d delay the report for three months to negotiate with China in international meetings.
That still irks lawmakers, who say the law doesn’t permit him to make such a decision. Kentucky Republican Sen. Jim Bunning read Geithner the language that ordered such reports.
“I think you’re smart enough to know what ‘shall’ means. … What made you think that the deadline in this statute is optional? And do you understand that you are violating the law by not issuing this report?” Bunning asked. “It doesn’t say in the statute that you may delay. It’s not optional.”
Geithner countered that he made the decision with the best interest of U.S. negotiating strategy in mind, and that the Bush administration also had delayed issuing the report, which is required twice a year.
Pressed by the chairman to say when the report was coming, Geithner responded, “I haven’t decided yet.”
The answers didn’t sit well with senators, who charge that China has duped successive administrations.
“By my calculation, at least five of your predecessors have been slow-danced by the Chinese,” said Sen. Ron Wyden, D-Ore. “Somehow robust offers are made, murky language is debated, but we constantly seem to be in the situation where someone in your position gets slow-danced off the dance floor.”
New York Democratic Sen. Charles Schumer was more blunt.
“Why do we always shy away from telling the truth?” asked Schumer, a main architect of legislation over the past six years seeking to pressure China to move toward a market-set currency as most developed and developing nations have.
In the wake of Geithner’s delay, China has declared publicly that it will resume its exchange-rate reforms, but it’s given no timetable for doing so. Geithner’s delay was widely viewed as an attempt to give China room to make a move without looking as if it came in response to pressure from Washington.
Since then, a growing debt crisis in Europe has strengthened the value of the dollar and sent the euro, used by 16 European nations, plunging. That’s muddied the waters for action by China, whose currency is linked to the dollar and whose exports also go to wealthy European nations.
Successive administrations have pressed China but stopped short of economic sanctions, concerned that doing so would damage cooperation on areas of national security interest such as this week’s U.N. sanctions on Iran for its nuclear ambitions and isolating the North Korean dictatorship.
“We are a nation with interests,” Geithner said, reminding lawmakers that relations between nations work on numerous levels. “I think you would do the same in our shoes, too.”
Hall is a reporter for the McClatchy Washington Bureau