U.S. Barks Up the Wrong Tree with China

by John M. Curtis
(310) 204-8700

Copyright January 19, 2011
All Rights Reserved.                                

               Visiting the U.S. on an official four-day state visit, Chinese President Hu Jintao finds himself pounded by the White House and Treasury Department to inflate its currency.  U.S. and European Union officials believe China’s currency, the Yuan or Renmimbi, remains artificially low, creating the current trade imbalance with the U.S. and Europe.  “We believe that more must be done.  That is an opinion that is held not just by this country but by many countries around the world,” said White House press secretary Robert Gibbs, assuring that China resists U.S. demands.  Before Hu landed at Washington-Reagan airport, U.S. diplomats had already tipped their hands, pressuring China to raise its currency.  Valued at about fifteen cents, U.S. sees the artificially low value as causing the current trade imbalance with China, swamping the U.S. market with cheap exports.

            Pounding on China to escalate its currency before Hu walks off the tarmac shows Washington’s current tone deafness to China’s economic problems.  Touted at the most important visit of a Chinese leader to the U.S. since Deng Xiaoping in 1981, Hu’s visit carries various risks and promises on all fronts:  Economically, militarily and politically,  President Barack Obama needs to foster a cooperative relationship with China to deal with the many emerging global conflicts, especially China’s role in containing rouge states like Kim Jong-Il’s North Korea and Ahmadinejad’s Iran.  Pressuring Hu about the Yuan makes no sense, especially with China’s strong manufacturing ties to the U.S.   Without China, Wall-Mart, the nation’s biggest retailer, and Apple Computer, the nation’s premier technology company, wouldn’t have a prayer to meet profit margins and quarterly earnings.

             Chinese government officials and business leaders have made billions in corporate investment in the U.S.  Alcoa and China Power Investment Corp. signed $7.5 billion worth of aluminum and clean energy deals.  General Electric also signed a $500 million deal to supply 50 gas turbines to China Huadian Corp.  “The purpose of my visit is to enhance mutual trust, promote friendship, deepen cooperation and move toward the positive, cooperative and comprehensive China-U.S. relationship for the 21st century,” said Hu shortly after landing.  White House officials should tone down the complaints and pressure about China’s currency.  With poverty widespread in China’s 1.4 billion population, Hu must continue to promote business development and jobs, all contingent on an affordable currency.  Pressuring Hu to escalate the Yuan’s value only antagonizes China’s goodwill overture.

            Instead of pounding on Hu to inflate his currency, Obama should be finding more ways to for U.S. companies to build factories and plants in China.  Publicly traded U.S. companies currently have no reason to stop outsourcing manufacturing to China, especially because productions costs are roughly one-sixth of the U.S.  While foreign automakers anticipated import objections, they’ve assiduously built plants to better sell autos in the lucrative U.S. market, the electronics industry has not done the same.  White House officials must encourage in the strongest possible way Foreign big-screen makers to manufacture in the U.S.  Exporting nations, like Germany and China, must see the consumer benefit to creating more U.S. jobs.  When Americans are employed, they buy more imported goods, generating more sales for foreign manufacturers unable to sell enough products in their native lands.

             Pushed by Tibetans, Taiwanese and persecuted Uighur and Falun Gong communities, Obama has to resist temptations to use Hu’s visit as a public beat-down.  “I think the president will be firm . . in outlining the important beliefs of this administration and this country,” said Gibbs, regarding what Obama intends to do about China’s dismal human rights’ record.  Rising above all other agendas, the U.S. finds itself unable to persuade China to raise the value of the Yuan.  U.S. senators Sherrod Brown (D-Ohio) and Olympia Snowe (R-Maine) want Barack to “address China’s unlawful practice of currency manipulation,” something that antagonizes the Chinese government.  U.S. officials know that China’s artificially low currency assures its preeminent position as the world’s leading exporting country.  Instead bashing China’s currency, the U.S. would be better served setting rules for foreign manufacturers.

            Focusing on exchange rates misses the U.S. opportunity to create better rapport with China.  “I actually think it’s helpful for China to understand this is a big issue for Americans, just like it’s a big issue for all of China’s trading partners,” Treasury Secretary Tim Geithner told NPR Radio.  Geithner should zip-it with respect to U.S. concerns about China’s $181-$252 billion trade surplus with the U.S., depending on who’s counting.  White House officials and members of Congress should work more constructively on how to induce foreign companies to manufacturer in the U.S.   Obama and Congress should find appropriate incentives for U.S. companies currently outsourcing manufacturing to China.  Pounding China to inflate its currency hurts U.S. global political interests and antagonizes the biggest potential market for selling U.S. goods and services  

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

©1999-2005 Discobolos Consulting Services, Inc.
(310) 204-8300
All Rights Reserved.