Obama Faces Losing Control Of Yuan Negotiations

If an American president lost control over his own international economic policy, he would be humiliated and emasculated. Congress is on the brink of taking over the  negotiations about the Chinese yuan’s value out of the Administration’s hands. Members of the Senate and House, some of them facing bruising re-election battles, have a tailor-made issue in trade with China and how it probably hurts U.S.  employment. That it, at least, the argument that politicians are making.

Treasury Secretary Geithner is attempting to stay ahead of the Congressional revolt, but his comments about the Administration’s concern over the yuan’s value fell flat when he added that it was unclear when the currency valuation situation will be resolved. He let a April 15 deadline to designate China as  a “currency manipulator” slip.  Instead, Geithner visited China to press his case in person. The President then lobbied his counterpart Hu Hintao when he visited Washington a week after Geithner’s trip.Several powerful members of Congress have already said they will seize the initiative over the yuan’s future value. Two months ago, 100 members of the legislative branch wrote a letter to Geithner threatening action. An assurance that talks were in process cause the House and Senate signatories back down.

Recently powerful Senators Chuck Schumer and Max Baucus said that the China situation had gone unaddressed for long enough. Baucus told a hearing that “We do not have a strategic, coordinated United States economic policy, that I can determine, with respect to China.” Senator Chuck Grassley added, “If one of the major beneficiaries of the world trading system engages in a pattern of refusing to play by the same rules as everyone else, then we should reconsider the rules that we apply to that country.”

Several members of Congress said they were prepared to override any Obama veto of legislation that forced significant trade sanctions on China.

The Administration has hoped to slowly coax concessions from the Chinese, but that approach was undermined when China announced its exports rose 50% in May. That news inflamed concerns among US politicians that unemployment problems in America are the result of China keeping the yuan artificially low.

If Congress takes the lead in pushing China toward changing trade policy, there will be no single negotiator to handle the lobbying of the People’s Republic. The President will have lost his authority and with it the chance to avert and all-out trade war.

Douglas A. McIntyre