The White House has announced that it will delay a Treasury Department report reviewing whether China is manipulating its currency.
This delay is likely tied to three goals of the US.
First, the US wants to stop the slide in US-China relations. After Obama’s meeting with the Dalai Lama, Hillary Clinton’s swats at China over internet freedom and lack of cooperation on Iran, and some tough wrestling on where “global economic rebalancing” should start, the temperature between both global powers has been getting icier. Obama and team want to turn this around, particularly in light of Hu Jintao’s trip to Washington in a week and a half.
Second, the US may hope that the growing tension between the nations combined with the “potential willingness” of the Department of Treasury to enable a spate of China-directed economic penalties may finally move China to float the value of its currency up at a faster pace.
Third, some are suggesting that the US has traded backing off on its currency findings if China demonstrates more support in the UN Security Council for tougher Iran sanctions. We’ll see.
Back room deal making with great powers to achieve significant international objectives makes sense — and Iran is one of those big problems today. I worry though that State Department and White House strategists may not see the difference between tying China into an effective comprehensive plan to change Iran’s nuclear track on one hand and roping China into an ineffective sanctions strategy on the other.
So, if the US did trade away its economic interests by holding back on the currency report, or burying it, the price needs to be higher than Chinese support of Iran sanctions.
— Steve Clemons