Washington Report, 2008-03

Abstract

The Bush Administration has argued that the economic challenges caused by China's burgeoning surplus and undervalued currency are best addressed through engagement—a combination of bilateral dialogue and an "intelligent use of leverage" in the form of WTO suits and U.S. trade remedy actions. A growing number of U.S. lawmakers who regard the massive U.S.-China trade deficit as a threat to America's economic welfare have argued that "engagement" has not produced timely results. Some are advocating using protectionist means to resolve the twin problems. Dr. C. Fred Bergsten, Director of the Peterson Institute for International Economics, offers new approaches for dealing with economic imbalances and currency misalignments that are not protectionist. Importantly, they would engage all the major Asian nations in a cooperative effort to ensure an orderly adjustment process.