U.S.-China Trade Issues on the Table
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U.S. Plans China Currency Talks at G-7
(The Journal of Commerce Online)
The United States will push China to untie its currency from the dollar as soon as
possible during Group of Seven meetings with Chinese officials, John Taylor, the U.S. Treasury Department's undersecretary for international affairs, indicated Friday.
"Our discussions with
China have been good and candid," Taylor said in a briefing before the official G-7 talks, where he is standing in for U.S. Treasury Secretary John Snow who pulled out because of a cold. "We know
they are taking steps toward a more flexible exchange rate."
Associated Press reported that Taylor, who is due to meet with Chinese economic policy-makers later Friday, said the United States
would like to see China adopt a flexible exchange rate "as quickly as possible."
People's Bank of China Governor Zhou Xiaochuan, however, hinted in an address to business and government
leaders attending a conference ahead of the G-7 meeting that China will be asking for more time.
Zhou did not address the issue directly, but said China needed more time to reform its economy - a
position repeated often by Chinese officials in the run-up to the meeting of finance ministers from the leading industrialized nations, where China has guest status.
Chinese leaders say they
eventually plan to let the yuan trade freely but argue that for now, keeping the yuan stable is the best option for the Chinese economy - and by extension, the world economy.
China's pegging of the
yuan to the U.S. currency has helped its exports rocket as the dollar has declined. Critics contend the yuan is undervalued by as much as 40 per cent.
A U.S. industry association urged Washington to
press Asian countries to act on growing currency issues at the G-7 meetings.
"Japan's dollar reserves reached $824 billion, and China's reached almost $610 billion in 2004," said Patricia
Mears, executive director for the Coalition for a Sound Dollar. "These new reserve data shine an even more urgent light on the need for our Asian trading partners to move toward market-determined
currencies."
In a letter to Snow, the group said that "A quick and substantial revaluation of China's currency is needed along with the concurrence on the part of Japan and other Asian
countries that they will cease intervening in currency markets."
Mears said the "undervalued" Asian currencies "are distorting and destabilizing the global economy."
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Baucus Advances Strategy for Trade Relations
with China
(Sandler and Travis)
In a February 3 speech to the U.S.-China Business
Council, Senate Finance Committee Ranking Member Max Baucus (D-MT) outlined a number of "priorities and predictions" regarding U.S. trade relations with China.
Baucus noted that the amount
of attention being given to this relationship is justified due to China's continuing rise among the world's economic powers; e.g., nearly 6 per cent of all exports last year were Chinese, and China is now
the United States' fifth-largest export market and second-largest source of imports. In addition, the high levels of annual economic growth that China has achieved over the past decade have been beneficial
for U.S. firms. Three out of four U.S. companies doing business in China were profitable in 2004, leading many of them to plan an expansion of their Chinese operations. Consumers also appear to understand
the positive impact China has on the U.S. economy.
In light of this situation, Baucus said, the U.S. should take a three-step approach to trade relations with China. He opined that the political will
to pursue these initiatives will grow as competitive pressures from China increase.
Reinforce Current Successes
The two sides should reinforce the formula of the Joint Commission on
Commerce and Trade (JCCT) of reconciling differences before they become disputes. The U.S. should also reinforce its efforts to ensure China's compliance with all of its WTO commitments, but in doing so
should use creative or proactive approaches to resolve potential disputes.
Re-Engage in Asia
Baucus urged the U.S. to re-engage in Asia, where in recent years it "has allowed
Chinese power and influence to grow... to the detriment of U.S. power and influence." The first step should be "forging closer trading ties with Asian countries on a bilateral, multilateral, and
sectoral basis," he said. This includes pursuing bilateral FTAs with Malaysia, whose "government is eager to forge closer economic ties with the United States;" Japan, which "would help
U.S. companies finally penetrate the protected Japanese market and help pull Japan...out of its economic doldrums;" and South Korea, which "finally appears serious about reforming its agricultural
and other economic sectors." Baucus also said that the Asia-Pacific Economic Cooperation (APEC) forum should return its focus to economic issues, "perhaps by accepting the challenge of negotiating
an APEC-wide free trade agreement" or negotiating sectoral trade liberalization initiatives for advanced medical equipment or other goods.
Re-Tool the Domestic Economy
Baucus said
that with over 80 per cent of the U.S. economy comprised of service sector industries, he believes that "it is only a matter of time" before Trade Adjustment Assistance (TAA) is extended to service
workers. He recommended an increase in federal spending on research and development, an area in which China is gaining on the U.S. He added that U.S. immigration policies should be adjusted to reflect
business needs, noting a 2004 U.S.-China Business Council study that found that delays in processing visa applications for business travelers cost U.S. companies $30 billion between July 2002 and March 2004.
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