Timothy Geithner Follows Up State Of The Union Charges On China
US Secretary of the Treasury, Timothy Geithner, continued the Obama administration's attack on Chinese economic policies at the Davos World Economic Forum.
Whereas previous attacks have focused on China's undervalued currency, this time criticism of Chinese currency manipulation was also accompanied by attacks on the subsidies and distortions that provide
China with a competitive advantage. President Barack Obama, in his State of the Union address, had already singled out China for unfair trade practices and has claimed that he has done more than previous administrations on this issue.
According to Secretary Geithner, the Chinese currency should be revalued upwards not only against the dollar, but against the euro and the Japanese yen.
The attacks reflect both the administration's frustration with China over Iran and the realization that the issue of China trade will become a major one in the fall presidential campaign, particularly if Mitt Romney emerges as the Republican nominee.
China has defended its purchase of Iranian oil and some oil industry experts expect China to be the major beneficiary from the sanctions on Iranian oil, as it will be able to purchase oil at a substantial discount.
Mitt Romney has repeatedly attacked China for its trade policies. Romney wants the Treasury Department to label China a currency manipulator. In an article that he published in the Washington Post on October 13, Romney accuses the Chinese of only halfheartedly embracing free-trade and then turning around and ignoring the rules followed by others.
China seeks advantage through systematic exploitation of other economies. It misappropriates intellectual property by coercing “technology transfers” as a condition of market access; enables theft of intellectual property, including patents, designs and know-how; hacks into foreign commercial and government computers; favors and subsidizes domestic producers over foreign competitors; and manipulates its currency to artificially reduce the price of its goods and services abroad.(emphases original)
By appropriating the intellectual capital of others and by subsidizing its exports or manipulating Chinese currency, China, according to Romney, is able to sell high-quality goods at low prices. Those who claim that the ultimate beneficiary of these practices is the consumer are shortsighted. They have forgotten some of the practices that went on in the United States when America first industrialized. Some captains of industry were quite willing to sell below cost - until they had driven the competition out of the market and were then free to raise costs again.
Newt Gingrich was a major advocate of free trade with China, a position he shared with Bill Clinton. Gingrich believed that trade was a voluntary action so the US could not hurt itself and trade would help open up China to liberal ideas.