Treasury report could get tough with China

Hillary Wicai May 9, 2006

KAI RYSSDAL: If you could ever say an economic report was eagerly awaited, we might have just the candidate for you. Secretary of the Treasury John Snow will tell us tomorrow whether he thinks China is manipulating its currency. Some in Congress and outside the government say Beijing has been keeping the yuan artificially low. Which hurts U.S. manufacturers since that makes their products more expensive overseas. American companies want the administration to get tough with China. But even so, those businesses might not win. More from Marketplace’s Hillary Wicai in Washington.

HILLARY WICAI: Previous reports have criticized China but haven’t gone so far as to label the country a manipulator. Some in business say now is the time.

Patricia Mears is with the National Association of Manufacturers. She says industries hit especially hard by cheap Chinese imports include machine tools, plastics and fabricated metals.

PATRICIA MEARS: What’s happened is, the Chinese imports coming into the country we often hear are actually lower than the cost of raw materials. Even with a low labor rate, it shouldn’t be that low.

And she argues that’s an unfair trade advantage.Peter Morici at the University of Maryland also hopes Treasury cites China and that it prompts some US action.

PETER MORICI: It would give more credibility to those in Congress who would like to take specific actions directed at China. For example, an across-the-board tariff to hasten China’s actions on this issue.

But that’s exactly what some fear. Nicholas Lardy is with the Institute for International Economics. He says big businesses like GM and Wal-Mart have no interest in rocking the US-Chinese relationship. For example, GM makes and sells a lot of cars in China. Lardy says companies like that fear an angry China could hurt their business.

NICHOLAS LARDY: There’s a risk of retaliation by the Chinese either in terms of restricting access to US goods coming from the United States or imposing costs on US businesses that are producing in China.

And Lardy says don’t forget that if China lets its currency float, then its exports will be more expensive. That means a trip to Wal-Mart could start looking more like a trip to the gas pump.

In Washington, I’m Hillary Wicai for Marketplace.

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