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White House Should Take Currency Actions, Against China, Says Clyde Prestowitz

White House Should Take Currency Actions, Against China, Says Clyde Prestowitz

Trade expert Clyde Prestowitz was on Kathleen Hay's Advantage Show, on Bloomberg Radio, late last week. Presowitz was a trade negotiator in the Reagan Administration, and has also worked with the Clinton Administration on trade issues. His latest book is called “The Betrayal of American Prosperity,” I reviewed it here at Benzinga.

Prestowitz criticized the Obama Administration, particularly the Treasury Dept., for failing to take action on Chinese currency manipulation. The Chinese undervalue their currency to boost their exports by making them cheaper. “The Chinese have been undervaluing their Yuan from 15% to 50% depending on who you talk to,” said Prestowitz. “The evidence is that they are intervening in the currency market every single day, and have accumulated huge dollar reserves,” said Prestowitz.

Since the U.S. Treasury has refused to label China a currency manipulator in the currency report they are required to make annually to Congress, Congressional action is ‘the only way,' said Prestowitz. He called the lack of action ‘silly', since other nations like Japan and Mexico, etc have already complained, and the Japanese have recently taken action in the currency markets.

Prestowitz thinks, that stating that China is manipulating their currency formally, would lead to IMF (International Monetary Fund) procedures and WTO (World Trade Organization) procedures. Prestowitz thinks that all the Asian export nations, including Japan, Korea, and Malaysia are manipulating their currencies and we should file complaints that would open up an IMF currency reset across the board, with WTO recourse.

Prestowitz called the WTO complaint taken recently by the Steel Workers, “a massive case.” The complaint is 5800 pages.

Kathleen Hays mentioned that Jim Bacchus had recently written an editorial in the Wall St. Journal against taking action against China. Prestowitz mentioned that China has broken several provisions of the WT0 agreements, particularly nullification and subsidy provisions.

The suggestion that the U.S. is manipulating its own currency by keeping interest rates low, is far fetched, in my opinion. Opponents of the U.S. taking action have made that assertion. Low interest rates is monetary policy carried out by a country's central bank, and should not be confused with intervening in currency markets.

Prestowitz suggested that there are several things the Obama Administration can do unilaterally, outside of the WTO. The U.S could counteract the Chinese purchase of dollars in the currency markets by sterilizing the transactions which would involve our own intervention in the currency and bond markets.

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