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Export Plan Appears To Be A Hope China Un-Pegs Its Currency

At the State of the Union, President Obama announced a plan to double US exports by 2015. The plan was to… double US exports by 2015. It was a Whip Inflation Now kind of moment.

But yesterday, Commerce Secretary Gary Locke provided more details on this strategy to double exports. I have to say, after reading the Locke speech, that I’m not much more enlightened. Apparently the White House seeks to tie this to free-trade agreements with Colombia, Panama and South Korea – three markets that are entirely too small to move the needle on exports even a little. This may make neoliberal free traders happy, but it does nothing for the goal.

The other parts of the speech were even more vague:

In a speech Thursday morning at the National Press Club, Mr. Locke promised that the new export program would “correct an economic blind spot that has allowed other countries to chip away at America’s international competitiveness.”

Administration officials said the export initiative would provide more financing for export promotion and would identify markets for fast-growing areas like green energy and environmental goods and services, health care and biotechnology.

Mr. Locke promised that from now on, export promotion would have “focused attention from the president and his cabinet.”

The administration will also form an export promotion cabinet — to be made up of Secretary of State Hillary Rodham Clinton; Ron Kirk, the United States trade representative; Agriculture Secretary Tom Vilsack and Mr. Locke.

While an export promotion cabinet is certainly the most consequential thing any Administration has ever done in history, somehow I don’t think that’s really the strategy. In fact, this statement by Tim Geithner contains more substance on trade promotion than anything in Locke’s speech.

Treasury Secretary Timothy F. Geithner said Thursday that he believed China would allow its currency to appreciate vis-à-vis the dollar — a move President Obama contends is essential to the U.S. economy by making U.S. exports more competitive and lowering China’s massive trade surplus.

“I think it’s actually quite likely [China] will move. I think they recognize it’s important to them, in their interest as well,” Geithner told the Senate Budget Committee.

I’m unclear why the Administration thinks this. But Obama did bring it up at the Senate Democratic retreat, saying that US goods shouldn’t be “artificially inflated in price and (Chinese) goods are not artificially deflated in price” based on currency valuation. So it’s clearly a talking point, although given the relative leverage over China, I don’t know why anyone would see revaluation as inevitable.

Paul Krugman explains the impact of Chinese currency manipulation very nicely. But I’m waiting for the explanation for the confidence that this will end. Because all I see is a China growing in influence and cornering the energy market, and nobody entirely equipped to stop them. I’d be happy to see the renminbi float, it would definitely help create American jobs. But why exactly would the Chinese want to do that? I suppose they might want to help US exports to revive our economy so Americans can keep buying Chinese imports, but there are some logical breakdowns in that theory.

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David Dayen

David Dayen