Dr. Elliot Feldman on April 15, 2010 presented the following speech at AmCham-China’s Conference of the Asia-Pacific Council of American Chambers of Commerce (APCAC). With his kind approval, China Textile publishes his study and views focused on the title as captioned above. The article expresses the author’s own stance.
Difficulties with China are now on Page One
of The New York Times and The Washington Post almost every day. There is
consensus in Washington that relations between China and the United States will
get worse before they get better. There are many issues, most related only
marginally, if at all, to trade. As examples, there is frustration in
Washington that China does not share a western view of the nuclear threat from
Iran, nor the urgency of the nuclear threat from North Korea. There is
disappointment and chagrin over Copenhagen, and obvious disagreement over Taiwan
and over the Dalai Lama. These issues are mostly strategic, sometimes cultural.
Cooperation on them would go a long way toward calming concerns in other areas.
There is no sign, however, of mutual understanding.
There are many additional issues dividing
China and the United States that are economic. The most obvious is that China,
as of January, held $2.4 trillion in foreign exchange reserves, of which nearly
$900 billion was in U.S. Treasury bonds and securities. The reserves had grown
$453 billion in 2009, and economists predict similar growth again in 2010.
No less important to the United States and
other countries is the valuation of the RMB. After the end of the dollar peg in
July 2005, the RMB appreciated over 20 percent against the dollar. With the
global economic crisis, however, China froze the RMB and let its value relative
to other world currencies drift down with the dollar. Premier Wen Jiabao dashed
American hopes last month that China would permit some adjustment any time
soon.
Within the U.S. administration it is said
that the word “currency” is not to be spoken, but the characterization of the
associated issues as “mercantilism” seems more than tolerated. Meetings between
Chinese and American leadership since September 15, 2008 frequently have
invoked references to “rebalancing,” the idea that Americans should save more,
Chinese should spend more, and Chinese exports to the United States should
decline as they find a market at home among consuming Chinese. Such
rebalancing, endorsed publicly by both countries, is difficult, however, when
an undervalued RMB persistently makes Chinese goods comparatively inexpensive
abroad and foreign goods expensive in China.
Both countries, and as important, the governments of both countries, are preoccupied with job creation. Weaker currencies tend to keep jobs at home. Chinese intransigence about currency valuation raises doubts among Americans, however, about the sincerity of Chinese pledges to rebalance. Those doubts are shared, perhaps even more acutely, in Europe. In a form of diplomatic jiu-jitsu, Premier Wen has called the U.S. Demand for currency adjustment “a type of trade protectionism,” and Commerce Minister Chen Deming has escalated the rhetoric, threatening that American action on currency would precipitate a trade war that, he insisted ominously, the United States would lose.
Many in Congress, and some in the Administration, want to make currency valuation a trade issue, which perhaps Premier Wen already has done for them by calling it one, confirmed by Minister Chen. Countervailing duty petitions now routinely allege currency valuation as an illegal subsidy (three times in 2009 alone), and many in Congress, and in the business community, want the Treasury Department to label China a currency manipulator. The U.S. Department of Commerce, however, consistently refuses to investigate the allegation, concluding each time that the elements of an export subsidy have not been pleaded sufficiently, particularly as to the subsidy law’s specificity test: the laws and regulations pertaining to valuation of the RMB, Commerce has concluded, are not specific to any industry or group of industries in China, nor is the valuation conditioned on exports.
This legal conclusion has enabled both the Bush and Obama Administrations to avoid a major confrontation with China over the RMB in trade remedy cases, while both Administrations have refused, at least so far, to acquiesce to congressional pressure. The aggressive language adopted by Premier Wen and Minister Chen on this subject, however, could change the dynamic and make it much more difficult for President Obama to hold the line. The postponement of a Treasury Department determination, an apparent trade-off for President Hu’s visit to Washington this week, may only preserve a U.S. card that could be played, in any event, only once.
While China’s exports benefit from an undervalued RMB, China insists that it is contributing to global economic and financial stability, and points to its faster recovery from global recession. China’s friends remind critics of the role of a stable Chinese currency more than a decade ago in halting an Asian financial meltdown. China is not without defenses for its conduct over currency valuation. （货币图）
In view of the non-trade issues – and the internet dispute over Google is many things, including strategy, technology, human rights, but also trade — it is arguable whether “pure” trade disputes between China and the United States, trade remedy actions regarding allegations of dumping, subsidies, safeguards, patent and trademark infringements, are all that important. The value of Chinese goods exported to the United States peaked in 2008; less than 2 percent of the value of those goods were subjected in 2009 - the year when U.S. manufacturers were most severely impacted by world trade conditions — to trade remedy investigations. The official U.S. trade line, in every Administration, reflects such data and has had the following elements: • The Administration is following the laws as set out by Congress, nothing more;• There is considerable friction in every significant trade relationship; • Such friction is normal and indicative of a healthy relationship;• Trade disputes represent a tiny fraction of overall trade and should be considered nothing more than irritants.
Unfortunately, U.S. trading partners rarely see the disputes this way. While successive Administrations try to minimize them, another branch of the U.S. government, Congress, takes them very seriously and promotes them. Congress, and American trading partners, see trade disputes as economically, politically, even diplomatically important, while Presidents try to ignore them. President Bush, it is said, was amazed at how distressed Canadians were over the treatment of Canada’s softwood lumber exports to the United States. Yet, the trade represented between $7 and $10 billion annually, and there were many U.S. Senators signing letters, testifying at International Trade Commission hearings, and lobbying the Office of the United States Trade Representative and the Department of Commerce. Frequent representations were made by the Canadian Ambassador. For years, no Canadian prime minister failed to raise the issue with the president whenever they met.
