One of the primary reasons that a delegation led by Treasury Secretary Tim Geithner and Secretary of State Hillary Clinton is in China this week is to discuss fair trade. That means the value of the yuan must be at the center of the conversations. President Hu Jintao suggested that his country may take some action on the currency, but gave no timetable and did not indicate how much easing his country may make. In other words, he made no commitment at all on a subject that the two nations have tussled over publicly since March.Geithner made a surprise trip to China in early April to try to break the deadlock with the People’s Republic. He had no success. The subject came up when Hu Jintao came to Washington later in the month and met with President Obama. The Treasury decided not to label China a “currency manipulator” on April 15, which was to be a deadline for the determination. The US decided not to start a trade war with that decision because it expected the yuan issue to be resolved.
In the place of a resolution, there have been a series of trade sanctions between China and the US. China was hit with tire tariffs. US producers were forced to pay a levy on chicken parts that are exported to the mainland. So far, the issues have not escalated beyond that. But, the US cannot allow China to put off a decision indefinitely. There has been agitation in Congress over the problem. More than a hundred members of the House said they would take matters into their own hands. The yuan valuation is seen as a detriment to trade and a threat to American jobs.
The US is already viewed as weak on the yuan issue. It has lobbied China for three months. China has kept the upper hand by stonewalling America’s senior officials. But, once Clinton and Geithner return from the mainland without a plan in place, the Administration could lose its position to continue the talks. It is an election year, and running on job creation will be a popular and too tempting for most politicians to pass up. The yuan decision may well move from the Administration to the legislative branch.
Douglas A. McIntyre