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US Treasury Secretary Suggests that China, Japan Free Exchange Rates - 2003-09-01


During a visit to Japan, Treasury Secretary John Snow has underscored the importance of free markets and flexible exchange rates in increasing global economic growth. Treasury Secretary John Snow hinted that Japan and China should free their exchange rates and further open their economies, suggesting that strong global growth would result.

"After all, what are the exchange rates but a set of signals to the global economy about how resources ought to flow?," asked Mr. Snow. "How well the resources can be best employed? It is important that these signals within the economy and among and between the economies convey the right information."

Mr. Snow's comments reflect concerns in the United States about the value of the Chinese and Japanese currencies. The United States wants Japan to stop selling its yen, which weakens its value against the dollar. Washington also wants China to loosen its tight control on its currency.

Weaker currencies make a country's exports cheaper and more competitive on the world market.

At a news conference, Secretary Snow refused to give details on his talks about exchange rates with Japanese officials. But the issue has been a sticking point for years between the two nations, which have a solid political alliance and are trading partners.

Mr. Snow is on a three-day trip to Japan and China before a meeting of the finance ministers in the Asia Pacific Economic Cooperation forum in Thailand. He is expected to discuss exchange rates and other economic issues in Beijing after he arrives Tuesday.

China has pegged its currency at a rate of about 8.3 to the dollar. Many U.S. economists and business leaders say that is too low, giving Chinese goods an unfair price advantage in the United States and other countries.

Mr. Snow steered clear of the issue as he spoke to journalists, saying only that the Bush administration supports policies that it believes will benefit all economies.

"Our fundamental message is always the same," he said. "How do we get more growth? How do we promote growth? Your growth is good for us and our growth is good for you, but see if we can work together to move all the major economies of the world to sustain the level of higher growth rates."

2.6 million U.S. jobs have disappeared in the United States this year, and many Americans and their politicians blame cheap goods from Asia, which they say hurt sales of U.S. products.

On the other hand, China's low labor costs and its inexpensive products benefit U.S. companies manufacturing there.