LexisNexis(TM) Academic - Document
LexisNexis(TM) Academic - DocumentCopyright 2005 The Financial Times Limited
Financial Times (London, England)
June 24, 2005 Friday
London Edition 1
SECTION: THE AMERICAS; Pg. 9
LENGTH: 594 words
HEADLINE: Fed and Treasury chiefs warn on China trade bars
BYLINE: By ANDREW BALLS and SCOTT HEISER
DATELINE: WASHINGTON
BODY:
Alan Greenspan, Federal Reserve chairman, and John Snow, Treasury secretary, yesterday warned Congress against erecting barriers to trade with China, saying this would do nothing to help US manufacturers but would hurt US consumers.
Imposing a tariff on Chinese imports would simply mean that the US imported the same goods from other low-cost economies in Asia and elsewhere, Mr Greenspan said. "Few, if any, American jobs would be protected," he told the Senate finance committee.
But, he said, tariffs would raise the overall cost of goods for US households and risked setting off protectionist reactions abroad.
"A return to protectionism would threaten the continuation of much of the extraordinary growth in living standards worldwide, but especially in the United States, that is due importantly to the post-world war two opening of global markets," he said.
Policy should instead aim to help people who lost jobs in declining US industries, through retraining and unemployment insurance.
Mr Greenspan and Mr Snow, the US government's top economic policymakers, appeared at a combative session of the committee, at which lawmakers from both parties expressed frustration at China's failure to adjust its currency and at what they said was the administration's inaction.
Senators cited complaints from US manufacturers about the currency peg, as well as concern about China's poor enforcement of intellectual property rights.
Mr Greenspan and Mr Snow both said greater currency flexibility was in China's own interests, to allow it to use monetary policy to manage its economy rather than keeping the currency peg.
The Treasury has hardened its rhetoric on China this year in response to rising protectionist pressure in China, and has privately told Beijing it must revalue its currency by at least 10 per cent, to help the administration resist Congress's demands for tariffs.
Mr Snow repeated the administration's call for an immediate revaluation, as part of a global effort to reduce trade imbalances that would require other Asian economies to allow their currencies to rise against the dollar.
"I cannot overstate my firm belief that resorting to isolationist trade policies would be ineffective, disruptive to markets and damaging to America's special role as the world's leading advocate for open markets and fair trade," he said.
Charles Schumer, a Democrat committee member and co-sponsor of a bill that would impose a 27.5 per cent tariff on Chinese imports if Beijing does not revalue, said it was wrong to portray the proposal as protectionist. "Free traders believe in floating currencies," he said, adding that China's currency peg was distorting global trade flows.
Mr Greenspan said the focus on the US's bilateral trade deficit with China was wrong-headed. "Some observers mistakenly believe that a marked increase in the exchange value of the Chinese renminbi relative to the US dollar would significantly increase manufacturing activity and jobs in the United States," he said. "I am aware of no credible evidence that supports such a conclusion."
He said an appreciation of the renminbi would reduce US imports from China, but that this would be redirected to other Asian economies. As US imports from China had risen since 2000, imports from other Asian economies had fallen, as China had become the last stop in the Asian supply-chain, importing components from its neighbours and assembling final goods.
The increase in the trade deficit with China, he said, "has largely been in lieu of wider deficits with other Asian economies, including Japan".
LOAD-DATE: June 24, 2005
Financial Times (London, England)
June 24, 2005 Friday
London Edition 1
SECTION: THE AMERICAS; Pg. 9
LENGTH: 594 words
HEADLINE: Fed and Treasury chiefs warn on China trade bars
BYLINE: By ANDREW BALLS and SCOTT HEISER
DATELINE: WASHINGTON
BODY:
Alan Greenspan, Federal Reserve chairman, and John Snow, Treasury secretary, yesterday warned Congress against erecting barriers to trade with China, saying this would do nothing to help US manufacturers but would hurt US consumers.
Imposing a tariff on Chinese imports would simply mean that the US imported the same goods from other low-cost economies in Asia and elsewhere, Mr Greenspan said. "Few, if any, American jobs would be protected," he told the Senate finance committee.
But, he said, tariffs would raise the overall cost of goods for US households and risked setting off protectionist reactions abroad.
"A return to protectionism would threaten the continuation of much of the extraordinary growth in living standards worldwide, but especially in the United States, that is due importantly to the post-world war two opening of global markets," he said.
Policy should instead aim to help people who lost jobs in declining US industries, through retraining and unemployment insurance.
Mr Greenspan and Mr Snow, the US government's top economic policymakers, appeared at a combative session of the committee, at which lawmakers from both parties expressed frustration at China's failure to adjust its currency and at what they said was the administration's inaction.
Senators cited complaints from US manufacturers about the currency peg, as well as concern about China's poor enforcement of intellectual property rights.
Mr Greenspan and Mr Snow both said greater currency flexibility was in China's own interests, to allow it to use monetary policy to manage its economy rather than keeping the currency peg.
The Treasury has hardened its rhetoric on China this year in response to rising protectionist pressure in China, and has privately told Beijing it must revalue its currency by at least 10 per cent, to help the administration resist Congress's demands for tariffs.
Mr Snow repeated the administration's call for an immediate revaluation, as part of a global effort to reduce trade imbalances that would require other Asian economies to allow their currencies to rise against the dollar.
"I cannot overstate my firm belief that resorting to isolationist trade policies would be ineffective, disruptive to markets and damaging to America's special role as the world's leading advocate for open markets and fair trade," he said.
Charles Schumer, a Democrat committee member and co-sponsor of a bill that would impose a 27.5 per cent tariff on Chinese imports if Beijing does not revalue, said it was wrong to portray the proposal as protectionist. "Free traders believe in floating currencies," he said, adding that China's currency peg was distorting global trade flows.
Mr Greenspan said the focus on the US's bilateral trade deficit with China was wrong-headed. "Some observers mistakenly believe that a marked increase in the exchange value of the Chinese renminbi relative to the US dollar would significantly increase manufacturing activity and jobs in the United States," he said. "I am aware of no credible evidence that supports such a conclusion."
He said an appreciation of the renminbi would reduce US imports from China, but that this would be redirected to other Asian economies. As US imports from China had risen since 2000, imports from other Asian economies had fallen, as China had become the last stop in the Asian supply-chain, importing components from its neighbours and assembling final goods.
The increase in the trade deficit with China, he said, "has largely been in lieu of wider deficits with other Asian economies, including Japan".
LOAD-DATE: June 24, 2005
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