By David Ethridge
U.S. Treasury Secretary John Snow will soon go to Thailand to meet with finance ministers of the 21-nation Asia Pacific Economic Cooperation organization on Sept. 4-5. At first glance, the trip appears fairly routine, part of APEC's annual gathering. But in the three days leading up to the APEC parley, Snow has a couple of side trips lined up that hold far greater interest to Wall Street and Main Street. He's set to meet with finance officials in Japan and China to discuss a wide range of topics, including hot trade and currency issues.
Snow's trip comes at a particularly sensitive time. In the U.S., a rising trade gap with Asia -- at the perceived expense of U.S. jobs and industrial output -- has the potential to become a political flashpoint in the 2004 election. U.S.-Japan trade frictions are an old story. But China's policies are coming under heavier scrutiny. A bipartisan group of U.S. senators has asked Treasury to investigate if China is unfairly manipulating its currency, the yuan, by keeping its value against the U.S. dollar artificially depressed, thereby boosting exports. Indeed, the Treasury is directed by a provision of the U.S. Omnibus Trade & Competitiveness Act of 1988 to issue an annual review to Congress on international economic and foreign exchange policies of other countries for this very purpose.
SOFT-PEDALING DEMANDS. Because of the sensitivity of the issue, financial markets should not expect any major announcement from Snow in the wake of his Asia trip, with a strong-dollar policy still the Bush Administration's official stance. Indeed, the U.S. has backed away from a direct call on China to revalue its currency. The Treasury's Undersecretary for International Affairs, John Taylor, suggested as much on Aug. 25, saying China recognizes the need for a more flexible foreign exchange stance, but heavy pressure on the Middle Kingdom to boost the yuan would