By BOB DAVIS and ELIZABETH WILLIAMSON
The Obama administration, employing a good-cop, bad-cop approach to China, applauded Beijing’s recent currency moves but opened a new fight over whether the Chinese improperly subsidize clean-technology manufacturers.
The moves were coordinated at the White House, which is balancing conflicting international and domestic interests. It wants to encourage Beijing to change its policies while convincing voters at home that it isn’t soft on Chinese trade practices that voters suspect take U.S. jobs.
On Friday, the U.S. Treasury took a soft line with Beijing—for the moment—by delaying the release of a report on whether China and other nations “manipulate” their currencies. The Treasury said the yuan has climbed more than 1% a month since Sept. 2, a pace that “if sustained…would help correct” what the U.S. considers an undervalued currency. Treasury Secretary Timothy Geithner has talked approvingly of the 20% appreciation of the yuan between 2006-08, and has indicated that branding China a manipulator wouldn’t accomplish anything.
A U.S. official said the U.S. planned to continue pressuring Beijing to prevent backsliding and expects to have allies at a meeting of foreign ministers from the Group of 20 nations next week in South Korea and a summit there in November.
The official said neither the U.S. nor China was seeking an accord in which countries would coordinate exchange-rate efforts to boost the yuan’s value. But the official said the administration is studying whether it could enlist Asian nations to agree to loosely link their exchange-rate policies in the hope that China might be more willing to let the yuan appreciate if its Asian competitors were doing the same. Chinese officials have said they weren’t interested in a regional accord.
Meantime, the administration fired a warning shot on the trade front. The U.S. Trade Representative’s office said it would investigate accusations made by the United Steelworkers that China is unfairly supporting green technology including wind and solar products. “It would be stupid politically for the administration not to take the [unfair trade] petitions seriously, especially before an election,” said Ted Truman, a former Obama Treasury official.
The steel workers alleged that China used “hundreds of billions of dollars in subsidies, performance requirements, preferential practices and other trade illegal activities.” Ultimately, the U.S. could decide to take the case to the World Trade Organization, but months of negotiations with Beijing will come first.
The move won applause from United Steelworkers president Leo Gerard. A union spokesman said the union would press President Barack Obama to eventually name China as a trade manipulator too.
Sen. Charles Schumer (D., N.Y.), a China trade hawk, wasn’t mollified. Last month the House passed legislation that would penalize China for currency practices, and Mr. Schumer said he would press for similar legislation in the Senate. Mr. Geithner has been trying to use the Congressional pressure to convince China to act more decisively-using Congress as the ultimate bad cop. But the administration is worried that the actual legislation could boomerang and hurt U.S. firms.
A Chinese embassy spokesman called the trade case “unwarranted” because China follows WTO rules.
—Robert Guy Matthews contributed to this article.
Write to Bob Davis at firstname.lastname@example.org and Elizabeth Williamson email@example.com