WASHINGTON – China has improved its position by reducing its current-account surplus relative to its economy but it remains one of a handful of countries that need to trim their large trade imbalances with the U.S., the Obama administration says.
The assessment came in a report sent to Congress on Friday. The twice-yearly report, submitted by law by the Treasury Department, doesn’t designate China or any other nation as a currency manipulator. But it singles out the six countries, all major U.S. trading partners — China, Germany, Japan, Korea, Switzerland and Taiwan — for special monitoring and U.S. pressure on their governments to change practices.
In the new report, Treasury added Switzerland to the list, saying its trade with the U.S. is now large enough to make it a major trading partner and subject to the Treasury’s analysis.
Being on the list opens the way to U.S. negotiations over lopsided trade balances with the countries’ governments.
Under a process Congress established this year, if the negotiations fail, the U.S. can seek to impose trade sanctions such as penalty tariffs, though those sanctions must win approval of the World Trade Organization.
There are three criteria for putting a country on the list: The size of the country’s trade surplus with the U.S., the size of the country’s current-account trade surplus overall, and the frequency with which it intervenes in currency markets.
In the case of China, Treasury said it met only one of the criteria, the large trade surplus with the U.S., compared with two in the last report issued in April. China’s current-account surplus fell to 2.4 per cent of its gross domestic product for the last four quarters through June, below the 3 per cent critical level, the report says.
In addition, China has intervened in the currency markets to prevent a rapid depreciation of its currency, the renminbi, that would have had a negative impact on the Chinese and global economies, the report notes. The renminbi recently hit a six-year low against the dollar.
It’s important for China to continue market-oriented change of its currency system, Treasury says.
The last country designated a currency manipulator by the U.S. government was China in 1994 during the Clinton administration.
The large U.S. trade imbalances with countries such as China, Japan and Mexico became an issue in the presidential campaign.
Republican presidential nominee Donald Trump has contended that the Obama administration and previous administrations have failed to enforce U.S. trade laws. He has said those failures have allowed foreign countries to run huge trade surpluses with the United States, costing millions of American jobs.
Trump has said he would direct his Treasury secretary to immediately declare China a currency manipulator as a way to bring the country to the bargaining table to change trade practices that hurt U.S. workers and companies.