Umm… So What About That Currency Report Due This Month?

By Cathalijne Adams
Pixabay Creative Commons

…seems like kind of helpful info to have going into trade talks with China, no?

The Treasury Department’s semiannual Exchange Rate Policies report is now more than a week overdue. But then again President Trump is almost three years overdue in labeling China as a currency manipulator — something he promised to announce on his first day in office.

True, it’s unlikely that this month’s report would name China a currency manipulator since October’s report didn’t either. Nonetheless, an examination of the country’s currency practices could help bolster the Trump administration’s bargaining position as it prepares to continue trade talks with China next week.

Though both countries have reportedly already settled penalties to deter currency manipulation in the pending trade deal, the Chinese renminbi’s value has been in decline in relation to the U.S. dollar as trade talks have heated up. China could easily further undervalue its currency to blunt the impact of tariffs – particularly as economic pressures continue to build.

But why does currency manipulation matter? It’s yet another method by which Beijing has gamed the international trade system, artificially lowering the cost of its exports and thereby gaining unfair competitive advantage. This method along with its other trade cheating practices, such as industrial subsidies, forced technology transfers, and intellectual property theft, have won China the lion’s share of manufacturing while undercutting manufacturing in the United States.

So, where’s that report?

Meanwhile, U.S. Trade Representative (USTR) Robert Lighthizer has shown that he at least is as motivated as ever to put an end to China’s trade cheating, continuing China’s 15-year run on the intellectual property (IP) Priority Watch List in a Special 301 report released Thursday. In the report, Lighthizer warns that China along with the other countries included on the Watch List that failure to address these IP concerns may result in tariffs.

It’s well past time for China to follow through on its reform promises, as the report notes:

“High-profile statements in support of IP and innovation by Chinese government officials are no substitute for real structural changes to address shortcomings in China’s IP system, which cannot be excused by the country’s stage of economic development. The United States, other countries, and the private sector continue to urge China to embrace meaningful and deep reform to its IP-related legal and regulatory framework. The results to date have represented missed opportunities to address priority concerns of the United States and others, including where China’s proposed revisions to legal and regulatory measures fail to adopt U.S. recommendations for reform.”

Now it’s the Treasury Department’s turn to offer China another healthy dose of trade reality.