Geithner signals growing impatience with China’s trade, currency policies

The Obama administration is considering a tougher stance on the Chinese government’s policies concerning currency and trade, Treasury Secretary Timothy F. Geithner told lawmakers Thursday.

With economic tensions growing, and midterm elections approaching, members of both parties have expressed support for cracking down on China. Geithner criticized the Chinese government for preventing appreciation of its currency, which has made Chinese exports cheaper abroad and increased prices of goods imported by China.

“It makes it more difficult for goods and services produced by American workers to compete with Chinese-made goods and services,” Geithner said before the Senate Banking Committee.

Geithner urged China to “end discriminatory trade and investment measures” and allow its currency to undergo significant appreciation.

“We are concerned, as are many of China’s trading partners, that the pace of appreciation has been too slow and the extent of appreciation too limited,” Geithner said.

Geithner told the committee that the administration would use “all tools available” to improve trade imbalances, including “direct engagement” between President Obama and China’s senior leaders.

Rep. Tim Ryan (D- Ohio) is sponsoring a bill supported by 143 House members from both parties. The bill would allow the U.S. to take action against countries that skew trade balances. In recent days Ryan has said support is growing for the bill, which is currently in the House Ways and Means Committee.

“Negotiations need to happen,” Ryan said. “A lot of it is taking the next step, and we have got to have the guts to do it.”

Drew Thompson, director of Chinese studies at the Nixon Center in Washington, said China would increase the value of its currency “incrementally and cautiously,” when the government felt it was in its best interests.

In order to improve trade balances without major political backlash the U.S. will have to give China “windows of quiet” to adjust its currency and trade policies, Thompson said.

“One interpretation of the small moves that we have seen in recent days is that the Chinese are testing the waters to see what sort of traction they get on the political front from this sort of limited action,” said Eswar Prasad, professor of trade policy at Cornell University.

jsteffen@tribune.com