Bush Administration in denial; no coherent plan in sight

WASHINGTON, DC -The U.S. Department of Treasury today again denied that China is manipulating its currency.  Secretary Snow, in a statement, highlighted the risks involved with China’s current, inflexible currency policy, including its negative impact on world markets.  Snow even conceded that “the distortions and risks created by China’s rigid exchange rate still persist.” 

The Bush Administration has been under increasing pressure from Congress to act on China’s currency policies, and many hoped that in today’s report the Administration would finally and clearly state what everyone knows - and what statute requires them to state - China is manipulating its currency. 

“The inaction of the Bush Administration shows that it is in denial,” said Rep. Cardin.  “America is facing record-breaking trade deficits, the Chinese have repeatedly failed to act on their promise to revalue their currency, and yet the Administration remains complacent.   Every day this Administration continues its kid-glove policy, we give an artificial trade advantage to the Chinese.”

As many predicted, China’s commitment earlier this year to revalue its currency has fizzled. When China revalued its currency (the yuan) by 2.1 percent in July 2005, it said it would allow the yuan to appreciate as much as 0.3 percent per day against the dollar. Instead, the value of the yuan remains essentially unchanged since July 2005.  The continued undervaluation of the yuan has made Chinese products artificially cheaper, exacerbating the U.S.-China trade deficit.

Democratic members of the House Committee on Ways and Means recently proposed a series of measures to address the growing problem of the trade deficit with China.  These measures include the filing of a case to challenge China’s currency manipulation practices within the World Trade Organization as well as introduction of comprehensive legislation in July to rectify a number of the outstanding trade issues between the US and China, including in the areas of currency manipulation, intellectual property rights enforcement, other WTO commitments that China has not lived up to, and China’s ongoing use of industrial policy and subsidies to advantage its industries, as well as steps to strengthen and update the U.S. sectoral safeguard mechanism.  

Democratic members have repeatedly called on Ways and Means Chairman Bill Thomas to bring the legislation, The Fair Trade with China Act (FTCA), H.R. 3306 before the committee promptly. 

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