International Law

Geithner to China and Currency Manipulation: Just Another Day in U.S.-China Relations

By Stan

Well, this should be interesting:

US Treasury Secretary Timothy Geithner will make his first official visit to China for talks June 1-2 as the two nations step up a high-level economic dialogue, his office said Tuesday.

The visit will be Geithner’s first to China since taking office on January 26.

Before taking office, Geithner created a stir when he said during his confirmation hearings that China is “manipulating” its currency to gain an advantage in trade.

He later toned down those remarks as US officials pledged to work closely with China to combat the global economic crisis.

I’ve been kind of tough in this blog when it comes to Tim Geithner, which makes me feel kind of bad in light of the fact that everyone and their mother has been piling on the poor bastard during the last couple of months with respect to the various bailouts and regulation of the U.S. financial industry. On the other hand, the Obama administration did kind of muck things up there for a while with their US-China relations PR.

We’ll see what happens with Geithner’s first visit. I’m sure the press attention will be formidable, and I’m also certain that every conceivable possible slight against China made by Geithner (deserved or not) will be scrutinized. Be that as it may, I don’t expect his first visit to be eventful. There’ll be a lot of photo ops, a lot of well wishing, a banquet or two, and definitely a few words in Chinese by Geithner to show off his Asia Street cred and background. Should be good theater.

I would assume that Geithner’s number one goal is to make as little news as possible, get this first trip under his belt, and lay a foundation for productive future dialogue. Too bad that members of the U.S. Congress are not playing ball:

A group of Republican and Democratic lawmakers will on Wednsday revive a bill that threatens to raise tariffs on Chinese goods to punish the country for what they call ?currency manipulation?.

Highlighting the protectionist sentiment within Congress, the bill would let companies apply for tariffs on imports from countries deemed to be deliberately undervaluing their currencies to be more competitive. China is its main target.

?By illegally subsidising its exports through the undervaluation of its currency by 30 per cent or more, China distorts the gains from trade, creates barriers to free and fair trade, harms US industries and has destroyed millions of US jobs,? those sponsoring the bill said in a statement.

This ridiculous legislation has bounced around Capitol Hill since (I think) 2003. Lots of folks threaten, and yet for some reason it never seems to come up for a vote. Imagine that. No political games being played, right?

Depending on who you ask, this Congressional action is either very useful or very counterproductive to bilateral discussions. I think it goes without saying that Geithner, due to his unfortunate comments during the transition period, has a problem when it comes to the currency issue. In other words, I don’t think it’s all that easy for him to maneuver when currency manipulation is the issue of the day.

Logically, one would therefore expect that any Congressional action that threatens to raise the importance of this issue as a matter of current policy is not at all helpful for the Treasury Department.

Well, that may make sense to most human beings, but I expect that most denizens of the District of Columbia see this a bit differently. In fact, I bet if you asked a bunch of senior-level administration types or members of Congress whether this sort of proposed legislation helps or hurts bilateral dialogue, they would answer with a resounding “of course it helps”. Why do you think Congress brings up this turd of a bill every nine months?

You see, diplomacy is a pretty screwed up thing. The guys that travel over here to talk with government officials are the good cop, but they often want the ability to point to the bad cop back home as the reason for their tough negotiation stance.

This is all bullshit of course, but it is accepted practice for international negotiations. In this case, Geithner is going to want to play the good cop, and this group of protectionist members of Congress from the Midwest are playing the role of the bad cop. And this is “accepted practice.”

Me, I admit that the good cop/bad cop thing goes on all the time. I may not like it, but yeah, it’s there. The question is whether this sort of tactic is productive or a waste of time.

Can’t give you a definitive answer on that, although I will stick to my basic principle (which works for business as well as government, for the most part): try not to be a dick. In this case, I think Geithner is more than capable of explaining to his Chinese counterparts that protectionist sentiment still exists in the US and that China government policy should take this into account when dealing with bilateral issues without being a dick and saying, “You know, if you are too tough on me, those guys back home are going to be really unhappy and force my hand.”

Personally, I don’t think he needs the threat of a punitive tariff bill to make his case, particularly since his counterparts already know 98% of what he’s going to say already.

Welcome back to Beijing, Mr. Secretary. We’ll leave the light on for you.

© Stan for China Hearsay, 2009. | Permalink | No comment | Add to del.icio.us

Full post as published by China Hearsay on May 13, 2009 (boomark / email).