Washington D.C., partner Elliot Feldman, Leader of the firm's international trade practice, was featured on the January 23 edition of Bloomberg TV's "On the Economy" program, discussing U.S.-China trade and the China currency controversy.
According to the story, President Obama believes China is "manipulating" its currency, based on comments made by Treasury secretary nominee Timothy Geithner during his confirmation hearings, suggesting a more confrontational stance toward that country than under the Bush administration. The new administration may try to persuade China to let the value of its currency, the yuan, freely float—a move that would let its value rise and would increase the cost of its exports.
Asked if he disagreed with those who believe the Chinese "peg" their currency, or if he disagreed with the approach the Obama administration may take to deal with the Chinese, Feldman said, "A little of both. We didn't float our currency until 1972 and we still regarded ourselves as a market economy . . . yet we say that the Chinese are not a market economy, in part, because they won't freely float their currency. The currency has appreciated more than a little bit—it appreciated 20 percent over the last two years . . . we seem to forget that China is now our third most important export market after Canada and Mexico . . . so they're buying our goods—they also hold most of our debt. If we were to insist upon an appreciation of the RMB, we would face a potential consequence of their having less interest in carrying our debt. So we're in a financial relationship with China where this kind of argument is counterproductive."
View the full interview below.