Despite conciliatory efforts by the two nations, relations between China and the US continue to be strained, largely because of disputes over Beijing's trade practices. In addition to the on-going disagreement over China’s currency policies increasing attention has been paid recently to China's heavily subsidized clean energy industry, particularly in the wake of the United Steelworkers' petition to the Obama Administration to have the World Trade Organization weigh in on the matter. While China has been accused of both violating WTO rules with its subsidies and at the same time making it difficult for foreign investors to enter its markets, the United States, in particular, may also be most susceptible to protectionist impulses as the economic downturn continues to put a drag on job growth. In this GR Brief, the recent conflicts over trade and energy will be discussed as well as steps China and the US may take to de-escalate tensions.
Growing Trade Tensions
Relations between Washington and Beijing, which had been improving since last spring's confrontation over the latter's currency policy (See GR's Saving the US-China Energy Partnership), have grown once again more complex during in the past month. Although the Chinese government had promised in June to begin letting the renminbi appreciate against the dollar, exchange rates have changed little since then. Treasury Secretary Timothy Geithner, for example, expressed dissatisfaction to the Wall Street Journal last week that China has not done more to bring the renminbi closer to what the U.S. views as an appropriate valuation vis a vis the dollar. On Tuesday, the People's Bank of China set the renminbi at a new high against the dollar, but it is not clear whether this rise will be sustained, prompting concern from the Obama Administration. Democrats in Congress, meanwhile, want more action taken against China; both the House and Senate are considering bills that would push the Obama Administration to identify countries that have "misaligned" currencies, and to either persuade those countries to reform their policies, or apply countervailing measures against the country in question to offset resulting trade distortions. In a hearing this week before the Senate Banking Committee, Senate Democrats pushed Secretary Geithner and the Obama administration to take a firmer stance toward China, questioning the logic behind the Secretary’s reticence to officially designate the country a currency manipulator amidst double digit unemployment.
See full article here.
16 September 2010