Snow warns against punitive China trade actions
(Agencies)
Updated: 2005-06-22 11:32

U.S. Treasury Secretary John Snow on Tuesday said that using punitive trade sanctions to compel China to modify its currency policy would be a mistake.

"I think anything that points in the way of closing down trade, interfering with trade, isolationism and protectionism, those are all the wrong way to go," Snow said in an interview on Bloomberg Television.

U.S. Treasury Secretary John Snow gestures during a media conference at the U.S. cultural center 'America House' in Frankfurt, western Germany, Thursday, June, 16, 2005. [AP]

Snow said that when he appears on Thursday before the Senate Finance Committee with Federal Reserve Chairman Alan Greenspan, he will make those points, but it also was important that the Chinese "move to a flexible exchange rate."

The Senate hearing is to discuss U.S.-China economic relations and is certain to focus on a bid to get China to modify its currency policy. On Tuesday, a group of lawmakers proposed giving China 90 days to move toward flexible currency or face an across-the-board tariff on its U.S. exports.

The U.S. has been leading a global drive to persuade Beijing to loosen the peg it maintains for its yuan currency against the U.S. dollar, a practice that American manufacturers claim amounts to an unfair trade tactic that costs U.S. jobs.

China has maintained a peg at about 8.28 yuan to the dollar for around a decade. It has become an irritant to U.S. manufacturers in recent years since it meant Chinese goods were effectively protected from rising in cost as the U.S. dollar lost value, so that the U.S. trade deficit with China has soared.

Trading partners have complained that the mounting U.S. current account deficit as well as in the federal government's budget gap pose a risk to the global economy.

The Bush administration takes the position that China's pegged currency is a roadblock in the way of normal adjustments to global imbalances and wants the policy loosened as soon as possible.

"Clearly the issue of China and China's trade policy, currency policy, are a matter of great importance to the global economy and I think it's important we consider to have this dialogue with China as we move toward resolution," Snow said.

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