In my (nearly) exalted position as Writer of Blog, I receive press releases from organizations and individuals. Everyone is selling something: a book, a political point of view, world peace and freedom. But I do not generally wish to help anyone flog on this blog, if only to maintain the maverick objectivity I think I at least try to imbue in each post.
I often respond to press releases asking for further information. If I get what I'm looking for -- not an answer which agrees with me, but which illuminates the topic and allows me to write on it -- I make use of them. Today's post represents an exception: taking a press release as it is and simply announcing it. Or at least portions of it. I don't think I need much more to write on this subject.
We find ourselves awaiting, with bated breath [Shall I bend low and, in a bondman’s key / With bated breath and whisp’ring humbleness,..], the US Treasury Department's annual report. Is or is not China a currency manipulator? Year in and year out, the political gamesmanship has amused and frustrated, much like one might watch a Marx Brothers movie without sound. Inevitably, China is pronounced NOT a manipulator of its currency. This year's report has been delayed since the spring, as Sec'y Geithner waited, as many Secretaries of the Treasury have since time immemorial, for Chinese decision-makers to go the way of Washington.
Once again (here is a discussion of the bill offered in 2007 and one in 2009), Congress proffered in March a bill entitled the Currency Exchange Rate Oversight Reform Act, this time of 2010.
Alas, the play has once again run its course, the climax, reached. China made announcements of only superficial changes to its currency exchange policy and the proverbial ball is back in the American court. Here's how it should end: Treasury reports that China is not a currency manipulator and the bill dies. One doubts that the writers of this annual Everyman have penned a new ending. Pull the cord, bring down the curtain and send in the jesters!
Now come forth the lobbyists, having seen the play and loving it, who demand a replay of its traditional ending (which this Chinadrama critic believes the audience will find themselves applauding quite soon). And here is where the press release comes into play, because I have received one from the Retail Industry Leaders Association (RILA). RILA is
...a trade association of the largest and most successful companies in the retail industry. Its member companies include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales. RILA members operate more than 100,000 stores, manufacturing facilities and distribution centers, have facilities in all 50 states, and provide millions of jobs domestically and worldwide.
Phew! That's a big one (association, not paragraph). Quite clearly influential. The letter RILA sent to US lawmakers, which I was copied on -- many thanks to RILA's press officer -- was also signed by the following:
Advanced Medical Technology Association (AdvaMed)
American Apparel & Footwear Association (AAFA)
American Council of Life Insurers
American Meat Institute
Business Roundtable
Coalition of New England Companies for Trade (CONECT)
Coalition of Service Industries
Consumer Electronics Association
Emergency Committee for American Trade (ECAT)
Fashion Accessories Shippers Association (FASA)
Financial Services Forum
Financial Services Roundtable
National Chicken Council
National Retail Federation
Pacific Coast Council of Customs Brokers and Freight Forwarders (PCC)
Retail Industry Leaders Association
Securities Industry and Financial Markets Association
Sporting Goods Manufacturers Association
TechAmerica
Travel Goods Association (TGA)
United States Association of Importers of Textiles and Apparel (USA-ITA)
U.S. Chamber of Commerce
US-China Business Council
[Note that last one there.]
Down to brass tacks: what does the RILA have to say to American lawmakers about China and currency manipulation?
RILA: ...we urge [lawmakers] to reject legislation that sanctions the application of antidumping and countervailing duties to address the U.S.-China exchange rate.
Why?
1) Antidumping or countervailing duties on Chinese imports are unfair.
RILA: Estimations of the "correct" currency value would be inherently subjective, unilateral and potentially politicized since there is no agreed upon method to determine what a country's exchange rate should be in the absence of a market-based determination.
But China wishes to control the value of its currency, has done so "forever" and will not move unless doing so is in its interest, which it is not.
2) The act is unlawful under international law and China could challenge us.
RILA: The proposed legislation would also appear to violate the United States' commitments under World Trade Organization (WTO) rules governing the calculation of antidumping duties and the types of subsidies that are subject to countervailing duties.
I think we need a specialist to argue this point. It is beyond my knowledge to comment. But, is it not in the interests of the United States to clarify the legality of its duties at a world body established for that purpose, rather than to pick up its own gauntlet before it is even thrown down?
3) The exchange rate doesn't matter.
RILA: ...the United States' non-market economy antidumping methodology already adjusts for currency undervaluation, as margins are calculated using market-based values from a third country and does not use Chinese costs or prices.
At least, I think that is what this sentence means. Clarification from RILA might help.
4) Pressing China will succeed.
RILA: ...work multilaterally and bilaterally to press China to allow market forces to determine the value of its currency.
No, this methodology has not worked -- over DECADES -- and it won't. Not unless Chinese decision-makers see that doing so is in their interest. Yes, we see far greater influence upon decision makers from non-state, i.e. "market" forces now than we did 30 years ago, but only because there was no market other than that which the state had created. (Whatever changes Westerners foolishly believe they have brought about in mainland China -- in the legal system, and education, and the arts -- these are slim accomplishments and, in my humble opinion, of little to no account.) Chinese decision-makers will exert control wherever they have the capacity to ensure that control remains in their hands. In other words, they will never "cave." At least, that is my reading of the top men. They will move as other powers wish them to only in the face of a crisis of extraordinary proportions and no other choice appears to suit their interests.
