For millions of Americans, April 15 is a day of dread. Taxes are due, and long lines at the post office beckon.
But in some circles, that date has a whole other meaning entirely. April 15 also happens to be one of the days this year that the Treasury Department releases its semiannual exchange rate report. This is the document in which our government has the opportunity to assign the label of “currency manipulator” to a foreign country.
Designating another government a deliberate trade cheat is a serious charge. Doing so would be the first step in formal action by Washington to addressing the problem, as it would initiate formal negotiations on the issue of currency between the accused government and our own. And if those talks broke down, it would allow our government to seek redress through direct sanctions.
But if you’re an entrenched interest that finds the idea of Treasury applying the currency manipulator label a little worrisome, don’t worry: At the Obama administration’s Treasury Department, they’re cautious. So cautious, in fact, that they’ve let one of the world’s most egregious trade cheats — the Chinese government — slide despite eight opportunities do something about it since the start of the president’s first term.
Currency manipulation is pretty simple: A country keeps the value of its currency deliberately low versus the U.S. dollar. This makes the country’s exports artificially cheap when entering the U.S. market while simultaneously acting as a tax on U.S. exports entering their market.
China does this.
And who is China’s biggest trading partner? You guessed it: The United States of America.
Last year, trade in goods between China and the United States totaled more than $536 billion. But it is unequal trade; we bought $315 billion in 2012 more than we sold to the Chinese, which makes for the largest trade deficit between two nations in recorded history. We’re already on pace to surpass that total in 2013. (more…)