Obama's 'Deal' With China Is Oversold
US pressure hasn't changed China's views on currency – and it is not interested in US efforts to 'isolate' Iran
The United States and China seem to have reached an agreement with regard to the exchange rate between their two currencies. The agreement is that the US government will stop yelling about it, and China will do whatever it wants to do, which will probably include some modest rise in the yuan some time in the near future.
This agreement was seen in the statements from both parties during the nuclear summit held in Washington over the past few days. "China rightly sees the issue of currency as a sovereign issue," said President Obama in response to a question about his meeting with President Hu Jintao of China. Stating more of what should have been obvious from the beginning of this dispute, he added: "They are resistant to international pressure when it comes to them making decisions about their currency policy and monetary policy."
President Hu concurred, saying that a change in the exchange rate "won't be advanced by any foreign pressure", which we also knew.
The Chinese government probably wants to let their currency rise at least somewhat anyway, since the authorities there are worried about inflation. An appreciation of the yuan will help them lower inflation, by lowering import prices.
On the other side, Washington has never been serious about trying to lower the value of the dollar in general. As has been well-documented as well as demonstrated throughout the bubble years and the recent meltdown, the US government is dominated by Wall Street. And Wall Street is not interested in a more competitive dollar; quite the opposite. The financial interests almost always prefer a stronger dollar, since it lowers inflation and makes their overseas acquisitions cheaper.
They do not care about the millions of manufacturing jobs that we have lost, or increasing employment with a more competitive exchange rate. In fact, our government seems to have relatively little commitment to reducing unemployment in general in the wake of the country's worst recession since the Great Depression.
The Obama administration forecasts unemployment of 10.0%, 9.2% and 8.2%, respectively, for 2010-2012. Unemployment is not projected to fall to the 5.2% rate considered to be full employment until 2018. This of course does not count the millions of people who are involuntarily working part-time or have left the labour force.
Given that there are relatively inexpensive ways to reduce unemployment in the United States, such as government subsidies for work sharing, we can only conclude that this is not a top priority under the current government. And of course the dollar is overvalued against a whole range of currencies, not just China's - and there seems to be no interest among our policymakers in bringing it down.
So while it is good that the Obama administration has discovered that public pressure will not move China to revalue its currency, it is also unlikely that there is much pressure coming from Washington behind the scenes. More likely, the Obama administration will use the public demands around the currency as a bargaining chip for things that it really cares about, such as getting China - a permanent member of the UN security council, with a veto - to agree to stronger sanctions against Iran. (This is one reason why China-bashing in the US is not a good political strategy - it takes the heat off our own government, which is the one most responsible for maintaining an overvalued dollar).
With regard to these sanctions, the Chinese are unlikely to concede anything significant. China has rejected any kind of wide-ranging sanctions in the past, for good reason. Increasing sanctions against Iran, as President Lula da Silva of Brazil has emphasised, would simply bring us another step closer to military conflict. China does not want this, and not only because - as the media emphasise - they do not want a disruption of Iran's oil supplies. The Chinese understand that the showdown between the US and Iran - like the prior showdown that led to war with Iraq - is not so much about any potential weapons programme but about power. Iran, a major oil producer and one of the largest countries in the area, is naturally going to have influence in the region. This is what Washington is really against, and what obstructs the United States from negotiating an agreement with Iran that would resolve the nuclear issue.
China has no interest in US efforts to try to "isolate" Iran - China would never invite countries from all over the world to a conference on securing nuclear materials and exclude Iran, as the United States has just done. Nor is China "isolated" in its own views on Iran: current security council members Brazil and Turkey oppose new sanctions on Iran and support renewed efforts to resolve the US-Iran conflict through diplomacy. Like most other governments, China appears to favour a more multi-polar world in which the United States' "super-power" status is less of a licence to tell other countries what to do.
An Urgent Message From Our Co-Founder
Dear Common Dreams reader, It’s been nearly 30 years since I co-founded Common Dreams with my late wife, Lina Newhouser. We had the radical notion that journalism should serve the public good, not corporate profits. It was clear to us from the outset what it would take to build such a project. No paid advertisements. No corporate sponsors. No millionaire publisher telling us what to think or do. Many people said we wouldn't last a year, but we proved those doubters wrong. Together with a tremendous team of journalists and dedicated staff, we built an independent media outlet free from the constraints of profits and corporate control. Our mission has always been simple: To inform. To inspire. To ignite change for the common good. Building Common Dreams was not easy. Our survival was never guaranteed. When you take on the most powerful forces—Wall Street greed, fossil fuel industry destruction, Big Tech lobbyists, and uber-rich oligarchs who have spent billions upon billions rigging the economy and democracy in their favor—the only bulwark you have is supporters who believe in your work. But here’s the urgent message from me today. It's never been this bad out there. And it's never been this hard to keep us going. At the very moment Common Dreams is most needed, the threats we face are intensifying. We need your support now more than ever. We don't accept corporate advertising and never will. We don't have a paywall because we don't think people should be blocked from critical news based on their ability to pay. Everything we do is funded by the donations of readers like you. When everyone does the little they can afford, we are strong. But if that support retreats or dries up, so do we. Will you donate now to make sure Common Dreams not only survives but thrives? —Craig Brown, Co-founder |
The United States and China seem to have reached an agreement with regard to the exchange rate between their two currencies. The agreement is that the US government will stop yelling about it, and China will do whatever it wants to do, which will probably include some modest rise in the yuan some time in the near future.
This agreement was seen in the statements from both parties during the nuclear summit held in Washington over the past few days. "China rightly sees the issue of currency as a sovereign issue," said President Obama in response to a question about his meeting with President Hu Jintao of China. Stating more of what should have been obvious from the beginning of this dispute, he added: "They are resistant to international pressure when it comes to them making decisions about their currency policy and monetary policy."
President Hu concurred, saying that a change in the exchange rate "won't be advanced by any foreign pressure", which we also knew.
The Chinese government probably wants to let their currency rise at least somewhat anyway, since the authorities there are worried about inflation. An appreciation of the yuan will help them lower inflation, by lowering import prices.
On the other side, Washington has never been serious about trying to lower the value of the dollar in general. As has been well-documented as well as demonstrated throughout the bubble years and the recent meltdown, the US government is dominated by Wall Street. And Wall Street is not interested in a more competitive dollar; quite the opposite. The financial interests almost always prefer a stronger dollar, since it lowers inflation and makes their overseas acquisitions cheaper.
They do not care about the millions of manufacturing jobs that we have lost, or increasing employment with a more competitive exchange rate. In fact, our government seems to have relatively little commitment to reducing unemployment in general in the wake of the country's worst recession since the Great Depression.
The Obama administration forecasts unemployment of 10.0%, 9.2% and 8.2%, respectively, for 2010-2012. Unemployment is not projected to fall to the 5.2% rate considered to be full employment until 2018. This of course does not count the millions of people who are involuntarily working part-time or have left the labour force.
Given that there are relatively inexpensive ways to reduce unemployment in the United States, such as government subsidies for work sharing, we can only conclude that this is not a top priority under the current government. And of course the dollar is overvalued against a whole range of currencies, not just China's - and there seems to be no interest among our policymakers in bringing it down.
So while it is good that the Obama administration has discovered that public pressure will not move China to revalue its currency, it is also unlikely that there is much pressure coming from Washington behind the scenes. More likely, the Obama administration will use the public demands around the currency as a bargaining chip for things that it really cares about, such as getting China - a permanent member of the UN security council, with a veto - to agree to stronger sanctions against Iran. (This is one reason why China-bashing in the US is not a good political strategy - it takes the heat off our own government, which is the one most responsible for maintaining an overvalued dollar).
With regard to these sanctions, the Chinese are unlikely to concede anything significant. China has rejected any kind of wide-ranging sanctions in the past, for good reason. Increasing sanctions against Iran, as President Lula da Silva of Brazil has emphasised, would simply bring us another step closer to military conflict. China does not want this, and not only because - as the media emphasise - they do not want a disruption of Iran's oil supplies. The Chinese understand that the showdown between the US and Iran - like the prior showdown that led to war with Iraq - is not so much about any potential weapons programme but about power. Iran, a major oil producer and one of the largest countries in the area, is naturally going to have influence in the region. This is what Washington is really against, and what obstructs the United States from negotiating an agreement with Iran that would resolve the nuclear issue.
China has no interest in US efforts to try to "isolate" Iran - China would never invite countries from all over the world to a conference on securing nuclear materials and exclude Iran, as the United States has just done. Nor is China "isolated" in its own views on Iran: current security council members Brazil and Turkey oppose new sanctions on Iran and support renewed efforts to resolve the US-Iran conflict through diplomacy. Like most other governments, China appears to favour a more multi-polar world in which the United States' "super-power" status is less of a licence to tell other countries what to do.
The United States and China seem to have reached an agreement with regard to the exchange rate between their two currencies. The agreement is that the US government will stop yelling about it, and China will do whatever it wants to do, which will probably include some modest rise in the yuan some time in the near future.
This agreement was seen in the statements from both parties during the nuclear summit held in Washington over the past few days. "China rightly sees the issue of currency as a sovereign issue," said President Obama in response to a question about his meeting with President Hu Jintao of China. Stating more of what should have been obvious from the beginning of this dispute, he added: "They are resistant to international pressure when it comes to them making decisions about their currency policy and monetary policy."
President Hu concurred, saying that a change in the exchange rate "won't be advanced by any foreign pressure", which we also knew.
The Chinese government probably wants to let their currency rise at least somewhat anyway, since the authorities there are worried about inflation. An appreciation of the yuan will help them lower inflation, by lowering import prices.
On the other side, Washington has never been serious about trying to lower the value of the dollar in general. As has been well-documented as well as demonstrated throughout the bubble years and the recent meltdown, the US government is dominated by Wall Street. And Wall Street is not interested in a more competitive dollar; quite the opposite. The financial interests almost always prefer a stronger dollar, since it lowers inflation and makes their overseas acquisitions cheaper.
They do not care about the millions of manufacturing jobs that we have lost, or increasing employment with a more competitive exchange rate. In fact, our government seems to have relatively little commitment to reducing unemployment in general in the wake of the country's worst recession since the Great Depression.
The Obama administration forecasts unemployment of 10.0%, 9.2% and 8.2%, respectively, for 2010-2012. Unemployment is not projected to fall to the 5.2% rate considered to be full employment until 2018. This of course does not count the millions of people who are involuntarily working part-time or have left the labour force.
Given that there are relatively inexpensive ways to reduce unemployment in the United States, such as government subsidies for work sharing, we can only conclude that this is not a top priority under the current government. And of course the dollar is overvalued against a whole range of currencies, not just China's - and there seems to be no interest among our policymakers in bringing it down.
So while it is good that the Obama administration has discovered that public pressure will not move China to revalue its currency, it is also unlikely that there is much pressure coming from Washington behind the scenes. More likely, the Obama administration will use the public demands around the currency as a bargaining chip for things that it really cares about, such as getting China - a permanent member of the UN security council, with a veto - to agree to stronger sanctions against Iran. (This is one reason why China-bashing in the US is not a good political strategy - it takes the heat off our own government, which is the one most responsible for maintaining an overvalued dollar).
With regard to these sanctions, the Chinese are unlikely to concede anything significant. China has rejected any kind of wide-ranging sanctions in the past, for good reason. Increasing sanctions against Iran, as President Lula da Silva of Brazil has emphasised, would simply bring us another step closer to military conflict. China does not want this, and not only because - as the media emphasise - they do not want a disruption of Iran's oil supplies. The Chinese understand that the showdown between the US and Iran - like the prior showdown that led to war with Iraq - is not so much about any potential weapons programme but about power. Iran, a major oil producer and one of the largest countries in the area, is naturally going to have influence in the region. This is what Washington is really against, and what obstructs the United States from negotiating an agreement with Iran that would resolve the nuclear issue.
China has no interest in US efforts to try to "isolate" Iran - China would never invite countries from all over the world to a conference on securing nuclear materials and exclude Iran, as the United States has just done. Nor is China "isolated" in its own views on Iran: current security council members Brazil and Turkey oppose new sanctions on Iran and support renewed efforts to resolve the US-Iran conflict through diplomacy. Like most other governments, China appears to favour a more multi-polar world in which the United States' "super-power" status is less of a licence to tell other countries what to do.