January 29, 2009 / 10:43 PM / 11 years ago

US lawmakers see efforts to calm Chinese currency row

WASHINGTON, Jan 29 (Reuters) - President Barack Obama is expected to contact his Chinese counterpart soon and assure Beijing that Washington is not seeking a “currency war” a lawmaker closely involved in U.S.-China issues said on Thursday.

Representative Mark Kirk, co-chair of the U.S.-China Working Group, said he and others in the bipartisan congressional group were told by administration officials that “the president will undercut the anti-currency message pretty directly.”

“My understanding is today or tomorrow there will be an Obama call to Hu Jintao in which the talking points are basically that the president will commit that we are likely not to have a currency war,” the Illinois Republican said.

The currency issue would likely be taken up in the Obama administration’s version of the Strategic Economic Dialogue with Beijing, a process initiated by the Bush administration, Kirk and other sources said.

The White House declined to comment.

Beijing reacted angrily last week when U.S. Treasury Secretary Timothy Geithner told senators at his confirmation hearing that China was manipulating its currency.

Some U.S. lawmakers, labor groups and manufacturers have long complained that China has intervened to hold the value of its currency artificially low to keep its exports competitively priced.

Many U.S. economists argue that China’s currency is undervalued by as much as 20-30 percent, but the International Monetary Fund said this was not the time to push China on its yuan currency. Some experts argue it would be dangerous to ratchet up trade tensions with China during a world recession.

“There’s a real danger that Congress will forget what we did in 1931,” said Kirk, referring to U.S. tariffs measures that helped turn a U.S. recession into the Great Depression.

ECONOMIES JOINED

Although there is no currency-specific legislation in the works, the U.S. House of Representatives on Wednesday approved a controversial “Buy America” steel provision as part of Obama’s $825 billion economic stimulus package.

Obama’s call to Hu would follow remarks by Vice President Joe Biden on Thursday that the Obama administration had made no formal finding on currency manipulation and would not impose on China “restraints that benefit our economy inconsistent with international trade agreements that exist.”

The working group’s Democratic co-chairman, Representative Rick Larsen, told Reuters the global recession’s simultaneous impact on the United States and China showed that “these two economies are nearly joined at the hip” and scapegoating wouldn’t work.

“It’s hard for me to point at any one country and say that we are getting a cold from their sneeze,” said lawmaker from Washington state.

The Alliance for American Manufacturing, however, says trade figures for November showed China was responsible for $23.1 billion of that month’s total $40.4 billion trade deficit.

“It’s painfully clear that China is manipulating its currency for a trade advantage and it’s the cause of inflated trade imbalances in the U.S.,” said Scott Paul, the nonprofit group’s executive director.

Steve Dunaway, former IMF China mission chief, said China’s exchange rate policy needed to be addressed because it was a major factor in the build-up of global financial imbalances that in turn led to the current financial crisis.

“It might not be the immediate concern, but you still have to be concerned about the Chinese exchange rate and you have to be concerned in the short term about policy actions they might take to make things worse,” he said. (Editing by Jackie Frank)

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