U.S. Relations With the People's Republic of China (2008)

U.S. Mission to the United Nations in Geneva

The Ninth Trade Policy Review of the United States
June 9 -11, 2008

Response by U.S. Representative

Mr. Chairman,

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The Economic and Institutional Environment

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I would like to briefly comment on China's criticism of U.S. Federal Reserve action, specifically with regard to U.S. macroeconomic policy and the dollar. The monetary and fiscal policies of the United States in recent months have been appropriately focused on supporting economic activity in a period of difficult adjustment. These actions are aimed at restoring the United States to healthy growth. The success of these actions is important not only to U.S. citizens but also to the health of the global economy. Clearly, the world would not welcome a U.S. recession. With respect to exchange rates, I note that the United States, unlike China, pursues a policy in which the exchange value of the U.S. dollar is wholly determined by the market.

As I mentioned earlier, U.S. external imbalances have declined with the current account deficit dropping from 6.8 percent of GDP in the last quarter of 2005 to 4.9 percent at the end of 2007. However, the resolution of global imbalances in the context of sustained growth cannot be fully achieved by any one country alone. As the U.S. external imbalance has shrunk, those of some other countries have increased. For example, China's current account surplus has risen from 7.1 percent of GDP in 2005 to 11.0 percent in 2007. China's current account surplus as a share of global GDP is now larger than the size of the U.S. deficit as a share of global GDP.

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