TEXT OF INTERVIEW
Steve Chiotakis: Well, China is stepping up resistance to American pressure over its currency. It’s calling on Washington to cool the politics and emotion of the issue and warning a further rise in its yuan could drive exporters out of business. Now U.S. officials claim pegging the yuan to the dollar is hurting global commerce. Former Labor Secretary Robert Reich isn’t so sure anything will get resolved anytime soon, and he’s here with us to talk about how this is all going to play out. Good morning, Bob.
Robert Reich: Good morning, Steve.
Chiotakis: Not a whole lot of bipartisanship in Washington lately, as we know. But Republican and Democrats did find something to agree on — that China must revalue its currency. Why are they doing that now, Bob, and why is China pushing back?
Reich: Well it’s all about jobs, Steve, really on both sides. If China allows its currency to rise against the dollar, as we want, we’d stop importing as much from them and presumably we’d export more to them. But hundreds of millions of Chinese are migrating off farms and into cities in search of work. So China’s artificially low currency is designed really to make sure there are enough jobs for them.
Chiotakis: Is there anything that the U.S. government can do to pressure them?
Reich: Well, members of Congress want the Treasury to formally site China for manipulating its currency, which would prompt an investigation by the commerce department and possibly import duties on Chinese products coming into the U.S. But, Steve, the administration fears if we did that, China would retaliate, which could hurt American companies now making and selling products over there.
Chiotakis: And one of those companies being Google, right?
Reich: Oh, Google is one example. Even though it’s now in a face-off with China over censorship. The Chinese authorities probably aren’t going to back down on that one either, again because political stability is so important to them. And although it looks like Google may be pulling out of China, at least in the short-term, over the long-term neither Google nor any other American company wants to lose access to 1.3 billion potential Chinese consumers.
Chiotakis: What about all those Treasuries that China owns, Bob? I mean China’s the largest holder of U.S. debt. Do they have us over a barrel because of that?
Reich: Well, let’s put it this way: It’s mutual dependency, Steve. They need the U.S. economy to recover so we’ll buy more of their exports, and they don’t want to do anything that may harm the value of the dollar, because that would leave them holding a lot of dollars that are worth less than they actually paid for them. So if our economic relationship unraveled, both sides would suffer.
Chiotakis: Former Labor Secretary Robert Reich is professor of public policy at the University of California Berkeley. Bob, thanks.
Reich: Thanks, Steve.
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