WASHINGTON — China’s currency and trade policies will be key issues for Wall Street investment banker Henry M. Paulson Jr. if he is confirmed as Treasury Secretary.
President Bush nominated Paulson on Tuesday to succeed John Snow, who has held the cabinet post for three years.
“As an investment banker, he understands the importance of opening new markets for American exports,” Bush said of Paulson, speaking in the Rose Garden. “He will help ensure that our trading partners play by the rules, respect intellectual property rights and maintain flexible, market-based exchange rates for their currencies.”
Paulson, who has been the chairman and chief executive officer of the Goldman Sachs Group for the past seven years, said, “During my 32-year career in finance, I have developed a keen appreciation for the role that capital markets play in driving economic growth and efficiency. I have witnessed and participated in the globalization of finance as major economies around the world have become increasingly interdependent.”
Lawmakers and business groups have criticized the administration for following a path of “quiet diplomacy,” a phrase Snow recently used to characterize the approach in dealing with China’s fixed currency policy.
Treasury has not charged China with currency manipulation in several reports submitted to Congress, even though many in Congress said it was appropriate.
Critics claim China’s fixed currency artificially lowers the price of Chinese goods by 15 to 40 percent and acts as an export subsidy, putting U.S. companies at a disadvantage and leading to American job losses and a trade deficit with China that hit $202 billion last year. China raised the value of its currency by 2.1 percent in July in a move to change the peg of the yuan to a basket of currencies from just the dollar. It raised the yuan another 1 percent this year, the currency appreciating by 3.4 percent, but these are largely seen as symbolic actions.
“I think the government’s position as articulated by Secretary Snow has been very disappointing regarding China and its manipulation of its currency,” said Cass Johnson, president of the National Council of Textile Organizations. “We would hope that the new secretary would review the policy toward China, would conclude it has failed to move China to a fair currency position and would take more aggressive measures. When there is a change of leadership, there is always an opportunity to take a second look and take corrective action.”
Sen. Charles Schumer (D., N.Y.) expressed his support for Paulson. Schumer has cosponsored legislation with Sen. Lindsey Graham (R., S.C.) to impose tariffs on Chinese imports if the Asian country does not let the yuan’s value increase in relation to the dollar, also and has held up the confirmation of Susan Schwab as U.S. Trade Representative over the administration’s position on China.
Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel, said, “I suspect the policy will remain the same as it has been, with constructive engagement with China. Wall Street understands how important it is, given the financial flows to and from China.”