Wednesday May 9, 06:26 PM
Congress hears currency manipulation complaints on China, Japan
By Rob Lever
 |
WASHINGTON (AFP) - US industry and labor leaders took their complaints to Congress Wednesday about what they claimed was currency manipulation by China that crimps US exports and costs American jobs.
At the hearing in the House of Representatives, Japan was blamed by an auto industry official for keeping the yen artificially low, hurting Detroit (DETROIT.SN - news) 's vehicle manufacturers.
A US Treasury official told the hearing that Washington is pressing China to move faster on allowing the yuan to float freely, and that Japan is not intervening in currency markets.
Private economists offered contrasting views on the reasons for the big US trade deficit, which is led by China.
Fred Bergsten, director of the Peterson Institute for International Economics, told the panel that the 857-billion-dollar US trade and investment deficit has boosted US debt to other nations to 14 trillion dollars.
"The global imbalances probably represent the single largest current threat to the continued growth and stability of the US and world economies," Bergsten said.
Bergsten said that China, by keeping its currency artificially low, is "exporting unemployment to other countries."
He said an "orderly" correction of the imbalances could be achieved by an increase of at least 15 percent in the value of the yuan against other currencies, "which would imply an appreciation of about 35 percent against the dollar."
Thea Lee of the AFL-CIO labor federation said the US administration "has failed even to correctly identify currency manipulation as a problem and has failed to hold governments accountable for their actions."
Lee cited one study showing that the deficit with China has displaced 1.8 million jobs since Beijing joined the World Trade Organization in 2001.
Brian O'Shaughnessy, chairman and chief executive of Revere Copper Products, said his New York-based firm can no longer compete with rivals that move production to China.
"The manipulation of its currency reduces the competitiveness of every other product, good and service in the world when compared to its production in China," O'Shaughnessy said.
"This form of protectionism by China is reaping huge rewards as its export-based economy is growing three or four times faster than the rest of the world ... Meanwhile, factory jobs are disappearing in the USA and the world. Even manufacturing plants in Mexico are moving to China."
General Motors (NYSE: GM - news) chief economist Mustafa Mohatarem said meanwhile that Japan "deliberately fosters a weak yen," causing major problems for US automakers.
"By nearly every expert account, the Japanese yen is severely undervalued in comparison to the US dollar and other world currencies," Mohatarem said. "This misalignment provides billions of dollars in annual subsidies for Japanese auto exports."
Deputy Assistant Treasury Secretary Mark Sobel said that although the yuan has risen on the dollar by more than seven percent since 2005, "China does not yet have the currency policy we want it to have and that it needs."
He said Treasury staff "meets frequently with Chinese counterparts to press this issue" but that more needs to be done.
"To be a responsible international stakeholder in the global economy, China needs to take swift and effective action to remedy these imbalances," Sobel added.
Sobel argued however that the value of the yen "is determined in open, competitive global markets, responding to the forces of supply and demand."
Morgan Stanley (NYSE: MS - news) 's chief global economist Stephen Roach said however that the US is running massive deficits "not because it is victimized by unfair competition from China or anyone else but because it suffers from a chronic shortfall of domestic saving."
Roach said a bill to give Washington more tools to deal with currency manipulation could backfire however.
"Congressional pressure on China could put its bid for dollar-denominated assets at risk," Roach said, becauyse it might induce China to invest less in US assets.
"Absent such buying, interest rates could rise for a saving-short US economy that still needs massive capital inflows."
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
