Economic Outlook: Democrats on trade

By ANTHONY HALL, United Press International  |  Sept. 23, 2010 at 8:33 AM
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The Obama administration is at risk of having trade relations with India and China co-opted by a disgruntled Congress, state officials and worker unions.

Oddly, initiatives on all three levels could be considered Democratic party platforms five weeks away from a national election.

In Congress, House Speaker Nancy Pelosi said she supports a bill that would put China in the doghouse on trade issues by declaring its currency policy unfair to others. China pegged the yuan to the U.S. dollar when the financial crisis began to unfold and leaving it pegged has kept the Chinese currency from appreciating. Economists now claim the yuan is 20 percent to 40 percent undervalued, giving China's exports an across-the-board advantage over other countries.

"For years, the Bush administration, the Obama administration and members of Congress have tried to persuade the Chinese government to allow its currency to respond to market forces. No significant progress has been made," Pelosi said Wednesday.

"The legislation must and will be consistent with our World Trade Organization obligations," she said, answering some Republican complaints congressional action could be illegal from the WTO's point of view.

Although the administration has been critical of China's currency stance, no direct actions have been taken as pressure builds for the Treasury Department to declare China a currency manipulator.

In Ohio, Gov. Ted Strickland signed an executive order in August that bars state funding from going to companies who use the funds for outsourcing jobs, which he defended in a letter to U.S. Trade Representative Ron Kirk as being strictly about fundamentals.

"Let me say this, as well: No one in India or anywhere else is going to tell the citizens of Ohio where we can create jobs or where we can spend our resources," Strickland wrote.

Answering complaints by Indian officials that the ban was "blatant protectionism," Strickland said, "They have every right to try to wrestle more American jobs away from us." But he drew the line at having taxpayers subsidize outsourcing, The Columbus (Ohio) Dispatch reported.

Assistant U.S. Trade Representative Carol Guthrie provided one response, saying Ohio's maneuver would not have "any significant impact on our robust trading relationship with India."

The United Steelworkers Union entered international waters recently, filing a 5,000-page complaint that China, through cheap loans and free land, unfairly subsidizes industries -- pointedly the sector known as green industries, such as solar panels, wind turbines and energy-efficient light bulbs.

Prior to the elections, the administration will have to respond, either supporting, rejecting or putting on hold its decision on the union's complaint. On that score, it was no mere coincidence that the complaint was filed so that the administration would have to respond 10 days before the election.

"We're going to mobilize around this," said union president Leo Gerard.

In international markets Thursday, the Nikkei 225 index in Japan fell 0.37 percent while the Shanghai composite index in China rose 0.11 percent. The Hang Seng index in Hong Kong rose 0.21 percent while the Sensex in India fell 0.4 percent.

In Australia, the S&P/ASX 200 rose 0.18 percent.

In midday trading in Europe, stocks were solidly down. The FTSE 100 index in Britain fell 0.84 percent while the DAX 30 in Germany lost 0.78 percent. The CAC 40 in France dropped 1.2 percent while the pan-European DJ Stoxx 50 slid 0.56 percent.

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