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US tells industry to back off China complaint

By Steve Toloken, Plastics News Staff Washington-The Bush administration bluntly is telling the manufacturing industry not to move ahead with a trade complaint against China’s currency policy, a decision that has left business lobbyists surprised and disappointed.In an unusual move, administration officials publicly urged manufacturers not to file the complaint, saying April 28 that they wanted to continue talking with China and that they oppose “economic isolationism” such as retaliatory tariffs against Chinese products.The decision surprised business lobbyists, who had been talking with the administration trying to coordinate their complaint, and who saw it as more of a cooperative effort that would give US government negotiators extra leverage in talking with the Chinese.The administration’s stance has left the Fair Currency Alliance, which includes the Society of the Plastics Industry Inc., trying to figure out what to do next.Some alliance members are angry and want to file anyway, while others want to explore different options, said Frank Vargo, vice president of the National Association of Manufacturers. Washington-based NAM is coordinating the alliance.Washington-based SPI said it is disappointed with the administration’s decision and wants to work with other manufacturing groups to address the issue. Manufacturing groups are upset at China’s policy of pegging its currency to the dollar, which they say undervalues its currency by 20-40 percent and makes Chinese imports cheaper. The alliance had been planning to file a complaint with the U.S. government, asking for undefined remedies consistent with World Trade Organization rules.But US government officials said such a complaint would do more harm than good. Some observers have said that China’s fragile banking system cannot support a market-based currency.”With steady progress clearly being made, the most effective way at this time to achieve the goal of a flexible, market-based exchange rate in China is to maintain the persistent engagement we have established, rather than through a trade petition,” said Treasury Secretary John Snow. “Economic isolationism does not work and it’s a path we will not follow.”Vargo said the alliance is not isolationist and recognizes that the U.S. government has given Chinese currency issues a larger profile lately.Other business groups said Washington needs to take stronger steps.”What we would like to see is the US government using access to its market more actively as leverage to get the Chinese to change,” said Lloyd Wood, spokesman for the Washington-based American Manufacturing Trade Action. “

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