Geithner Decides to Focus on Business Concerns at the Expense of Workers in Negotiations With China

That would have been an appropriate headline for a Washington Post article that essentially told readers that Treasury Secretary Timothy Geithner would focus on issues that matter to business in his discussions with Chinese leaders. The most important issue for workers in dealing with China is a drop in the value of the dollar relative to the yuan.

Photo by Michael Mandiberg

This would reduce the price of U.S. exports to people living in China and make imports from China more expensive. That would lead to more exports and fewer imports. Also, many other countries would likely follow the lead of China if it were to raise the value of its currency relative to the dollar. This would improve the U.S. trade balance overall. Economists agree that if the United States is to achieve full employment without large budget deficits or negative private savings, as we saw during the housing bubble years, this sort of adjustment is essential.
However the Post bizarrely told readers:

chief among the bright spots, according to the Treasury chief and many observers, has been progress toward closing the yawning trade deficit between the two countries. U.S. exports to China have almost doubled since the beginning of Obama’s term.

Actually, there has been zero progress towards closing the “yawning trade deficit.” The U.S. trade deficit with China in the first two months of 2012 was $45.4 billion, from $42.1 billion in 2011. This puts the U.S. on a path toward having yet another record trade deficit with China.
The piece then tells us in the passive tense:

Even the issue of getting China to stop pegging its currency to the dollar — a major source of tension a few years ago — has receded somewhat, as the value of China’s yuan has moderately increased against the U.S. dollar.

Read more: http://my.firedoglake.com/deanbaker/2012/05/02/geithner-decides-to-focus-on-business-concerns-at-the-expense-of-workers-in-negotiations-with-china/