The United States is becoming more competitive with China as more companies see fewer benefits of moving their investments offshore, U.S. Treasury Secretary Timothy Geithner said on Wednesday.
We are seeing a very promising shift in the relative competitive position of our two economies, Geithner told a congressional panel, citing a number of companies that have announced plans to move production back from China because of rapidly rising costs.
You are seeing people try to reassess in recognition of the fact that the competitive playing field is shifting a bit in our favour and reassess the merits of investing and building stuff in the United States, he said.
Geithner also defended the administration's handling of trade issues with China. He said they had been aggressive in challenging Beijing's unfair trade practices at the World Trade Organization and slapping duties on unfairly priced and subsidized imports from China.
Lawmakers accuse China of keeping their currency artificially low to boost exports and asked Geithner why the Obama administration had failed to label China as a currency manipulator.
Could this be as result of our fear of them extending further credit to us, said Hal Rogers, a Republican Representative in charge of appropriating funds.
Geithner said that had no bearing on the administration's decision and said: It is very important for us that China continue to allow their exchange rate to rise against the dollar. We agree that they have some ways to go, he said.
The U.S. Treasury Department faces a semi-annual deadline on April 15 to declare whether any country is manipulating its currency for an unfair trade advantage. The department, under both Democratic and Republican administrations, has not cited any country since 1994, when China was last named.
Mitt Romney, the front-runner in the Republican race to challenge President Barack Obama for the White House in November, has promised one of his first acts if elected would be to label China a currency manipulator, something the Obama administration has six times declined to do.
That would set the stage, under Romney's plan, for the United States to impose countervailing duties on Chinese goods to offset the advantage of what many consider to be China's undervalued currency.
Last year, the Democratic-controlled Senate passed legislation to do essentially the same thing.
However, the measure has stalled in the Republican-controlled House of Representatives, where leaders say they fear it could start a trade war, and the Obama administration has not pushed for a House vote on the currency bill.
Meanwhile, the World Trade Organization hosted a symposium this week for countries to air their frustration about currency practices of other WTO members.
The United States was represented by U.S. Ambassador to the WTO Michael Punke, and Deputy Assistant Treasury Secretary for International Monetary and Financial Policy Mark Sobel.
When trading partners believe others are allowing their exchange rates to adjust in line with fundamentals, there is less pressure for protectionism and more support for trade liberalization, Sobel said in a statement.
(Reporting by Rachelle Younglai and Doug Palmer; editing by Neil Stempleman and Andrew Hay)