The Obama administration is delaying a report to Congress on currency policies amid calls from some lawmakers that it should cite China as a currency manipulator harmful to the US economy.
On Saturday, the White House has denied any connection between delaying a report on China's currency policies and seeking Beijing's cooperation on new penalties against Iran for its nuclear program.
The report to Congress was due April 15 — just as China's president comes to Washington for a nuclear security summit.
Treasury Secretary Timothy Geithner said Saturday he was delaying publication because several high-level international meetings in the coming months would be a better way to advance the US position.
Still, Geithner said in a statement that China should adopt "a more market-oriented exchange rate" to balance the US trade deficit with China, which totaled $226.8 billion last year — the largest imbalance with any country. US manufacturers say China's yuan is undervalued by as much as 40 percent and is a big reason for the massive trade deficit.
A stronger yuan versus the dollar would make US products less expensive in China, while making Chinese goods more expensive for American consumers.
White House economic adviser Lawrence Summers told ABC television's This Week
that the Iran matter wasn't causing the delay and that those meetings were a good way to hold direct dialogue with the Chinese.
Geithner's announcement came a day after the White House signaled an improvement in relations between the two countries amid news that Chinese President Hu Jintao will attend a summit on nuclear security later this month in Washington. President Barack Obama told the Chinese leader during an hourlong phone call that he welcomed the decision.
The delay of the Treasury report could be designed to avoid embarrassing the Chinese at a time the administration is enlisting their aid on sensitive issues of nuclear security and Iran's nuclear program. Hu is scheduled to attend the summit the same week that the report normally is due.
The administration is hoping that China will again allow its currency to rise in value against the dollar as a way of narrowing the trade gap — as it did until mid-2008 when the global recession began to cut sharply into China's exports abroad.
In his statement, Geithner said "there are a series of very important high-level meetings over the next three months that will be critical to bringing about policies that will help create a stronger, more sustainable, and more balanced global economy." They include a meeting of the Group of 20 rich and developing nations in Washington this month, and a strategic and economic meeting with China in May.
"I believe these meetings are the best avenue for advancing US interests at this time," Geithner said.
Two weeks ago, a group of 130 House of Representatives members sent a letter to the administration urging a citation of China as a currency manipulator. The lawmakers also called on the Commerce Department to impose trade sanctions on China on the basis that its currency system is an unfair trade practice.
In addition, 14 senators unveiled legislation calling for stiff trade sanctions against China if it doesn't let the yuan rise in value against the dollar.
China rejected the pressure from US lawmakers and accused Washington of trade protectionism that Beijing said could hurt the global economic recovery. China insists it is not intentionally pursuing a trade surplus.
Geithner said then that the Treasury Department had not yet decided whether to cite China as a currency manipulator in the twice-annual report to Congress on the trade and currency policies of the United States' major trading partners.
Such a finding against China would trigger talks between the two nations — with a threat of trade sanctions if the negotiations failed to resolve the issue. The Obama White House, following the lead of the Bush administration, has so far refused to formally peg China as a manipulator, believing that the more productive course would be to convince the Chinese that it is in their own interests to allow their currency to rise in value.
In separate statements, the head of the Senate Finance Committee and its senior Republican both criticized the decision to delay the currency report. The panel's Democratic chairman, Sen. Max Baucus, said that for years, the Treasury Department "has given China's currency practices a free pass, but it's time to reevaluate."
"For too long, the United States has pursued diplomacy at the expense of American jobs and exports," he said. "Further delay is not the answer."
Republican Sen. Charles Grassley called on the administration to prepare an unfair trade case against China before the World Trade Organization. "Everyone knows China is manipulating the value of its currency to gain an unfair advantage in international trade," he said. "If we want the Chinese to take us seriously, we need to be willing to say so in public."
But Rep. Sander Levin, a Democrat who is chairman of the House Ways and Means Committee, which oversees trade policies, said delaying the report has "a defined purpose."
"It is to see if, in the next few months, the international community
will address the causes of major global imbalances, including China's
substantial undervaluing of its currency, which hurts American jobs and
businesses," Levin said. "If the multilateral effort does not result in
China's making significant changes, the administration and Congress
will have no choice but to take appropriate action."
Tonelson, research fellow at the US Business and Industry Council,
which represents 1,900 mainly family-owned US manufacturing companies,
said Geithner's decision "guarantees that at least through June, more
US factories are going to be closing down, more US workers will lose
The international meetings that Geithner cited will run through June.