Fred Bergsten, director of the Peterson Institute for International Economics, is a long-time free trader. He advocated forcefully for the North American Free Trade Agreement and has pushed for tighter trade relations with China and the rest of Asia.
 |
| Fred Bergsten, director of the Peterson Institute for International Economics (Bloomberg) |
But when it comes to Chinas foreign-exchange policies, hes up in arms. He wants the Obama administration to name China a currency manipulator — a decision Treasury must make by April 15 — and bring a case against China at the World Trade Organization. Essentially, he argues, Chinas currency policies act as an unfair trade subsidy.
He talked with the Wall Street Journals Bob Davis about his proposal. Below is an edited transcript.
What are the chances the Obama administration will take your advice?
Bergsten: The administration has looked at it carefully, but the U.S. Trade Representatives legal people have doubts they could win the case. Even so, it would highlight the issue and highlight the shortcomings of current economic system. The International Monetary Fund (which reviews foreign exchange policies) has no teeth; the WTO does. (A win at the WTO can authorize a country to apply tariffs on imports.)
What do you hope to accomplish by making this proposal?
Bergsten: I want to shine a spotlight on China in all available multilateral forums. That would galvanize multilateral pressure on China and get them to move. It would also expose weaknesses in the system.
What would happen if the administration moved along the lines you propose?
Bergsten: There would be real battle between the U.S. and China to get allies. The U.S. should try to get as many allies as possible to join a petition to the WTO. China probably would try to line up its allies too. Youd have a political battle in a WTO context
Would these tactics make it more or less likely that China would revalue its currency?
Bergsten: I think that in the short run, it would be a little less likely. But one or two or three months out, it would be more likely. China wouldnt want to have long period where there are multilateral cases against it.
In X months down the road, based on internal considerations, theyll let the currency rise. Short run, theyd huff and puff.