The US-Sino Currency Dispute
Simon J Evenett

In July 2010, the US Treasury finally released its delayed currency report, which said that China's currency is undervalued, but stopped short of claiming that China is manipulating its exchange rate. At that time commentators such as Paul Krugman, as well as members of Congress, were arguing the case for getting 'tough' with China over its exchange rate manipulation. The release of the Treasury report in July appeared to bring a measure of calm to the debate, but this was shortlived and the controversy has erupted again this month.

Thanks to deft diplomatic footwork, a US-China confrontation over the renminbi has been avoided – or at least postponed. This is a very good thing. Escalation of this conflict between the world’s two largest traders is the last thing the world economy needs. Many nations around the world are relying on rapidly recovering trade flows – both imports and exports – to get the factories back to work. And trade wars – like real ones – can be surprisingly difficult to manage once started.

But what we’ve seen is not a peace treaty – it’s a truce. The dispute has not been resolved. The US Treasury merely postponed the publication of its report on foreign currency manipulators (initially due yesterday, 15 April 2010). Moreover, that’s the US Executive Branch. Under the US Constitution, it is Congress that has the right to regulate trade. They can act at any time. With mid-term elections looming (November 2010) and unemployment high and persistent, the temptation to been seen as “doing something” is rising.

Likewise, China is surely following developments keenly. As they demonstrated last year when the US imposed tariffs on imports of tyres, the Chinese are able to react quickly to US trade policy moves.

This book which gathers 28 short essays written by 33 authors from around the world – aims to provide a one-stop shop for the best available economic, legal, political, and geopolitical thinking on the confrontation, its causes, and the likely consequences.