Interview: Economic Strategy Institute---Prestowitz, Clyde---President
>> bush administration officials told reporters in a background briefing today they don’t expect china to announce any changes to its currency policy during this week’s summit in washington. so what is likely to come out of hu jintao’s visit? clyde prestowitz is president of the economic stragegy institute and joins me now. thank you very much for coming in, clyde.
>> my pleasure.
>> currency seems to be the main focus of people on capitol hill. a lot of manufacturers around the country. if we’re not going to get something out of it on that subject this week, what are we likely to get? anything that would make people a little less concerned about the trade deficit?
>> i think two things. i think while i agree with the administration, i doubt that president hu will suddenly announce he will dramatically revalue the chinese currency. they’re hoping he will privately indicate some flexibility to allowing the chinese currency to rise more than it has over the next year or so. beyond that, i think they’re hoping that they’ll be able to make progress on getting better protection for intellectual property, for u.s. patents and trademarks in china. they’re hoping to get more deregulation in the chinese market , more transparency, predictability in the whole trade situation in china.
>> how do we measure that? the chinese could say they’re going to crack down on piracy. they’ve said it in the past.
>> they have and there are periodic campaigns. one way is measure it is their new campaign. we’re hoping there will be a new campaign of cracking down. another way to think about it is this, china itself is becoming more interested in becoming a technological power. china’s beginning to invest quite a lot in its own technology development and that means it suddenly has more interest in protecting intellectual property, because it may be having some of its own.
>> the chinese certainly don’t think of themselves as subservient to the united states. we’ve talked a lot about what the u.s. expects from hu jintao. what does hu expect from george bush?
>> i think he’s expecting maybe a little bit more understanding from bush with regard to the currency issue. he’s hoping that he can somehow aleve alleviate some of this pressure on revaluing the chinese currency. secondly, i think he’s particularly hoping that the u.s. will―we have export controls, high technology products and we don’t always allow them to be exported to china and we would like to have relaxation of that kind of thing. and he particularly wants predictability from the u.s. he doesn’t want to face a lot of anti-dumping suits and complaints and litigation in the world trade organization. he wants the u.s. to keep things steady as she goes in terms of u.s. trade policy.
>> how likely is he to get that if he won’t concede anything publicly on the yuan?
>> this is a negotiation. so i think both he and president bush have their work cut out for them. but i think there’s a reasonable grounds to hope they can come to some meeting of the minds.
>> there’s a lot of security issues on the table, as well. taiwan for the chinese, iran for the u.s., nuclear program. how much does that play into it and how much does it limit their flexibility in what they can give in the economic area?
>> the security thing, i think, actually helps, because they both have an interest in fighting terror and they both have an interest in constraining development of nuclear weapons by iran or by north korea or others. so i think that gives them, in a way, some common ground. obviously, there are security issues between the u.s. and china particularly with regard to taiwan but there is common ground there which i think might make it easier on the economic side. one thing that i think is important to emphasize, though, is this. we talk about the chinese currency but the real issue, here, and maybe this is a place where bush and ohio can make some progress―is that all of the asian currencies are way undervalued. it’s not just the chinese currency. if you really want to reduce the u.s. trade deficit even by half, you’re probably looking at a dollar devaluation of 50%.
>> got to leave it there. thank you very much, clyde prestowitz. when we return, is china trying to buy into the u.s. securities industry? “money & politics” returns in a moment.
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Listen Interview: IRS Commissioner---Everson, Mark---Politician / Govt Official
hello, i’m michael mckee, reporting today from washington. welcome to “money & politics.” taxpayers shouldn’t have too many complaints. the government gave us an extra two days to file this year because the normal deadline of april 15 fell on a saturday. but by midnight, you either have to have your returns or a request for extension in the mail and post marked. some states have an extra day because of a state holiday and there’s an automatic extension for some hurricane katrina vments. but for everyone else, this is it. coming up, we’ll get the latest from i.r.s. commissioner mark everson. but first, record oil prices. crude oil surged more than a dollar to $70.40 a barrel in new york, its highest close on concern the dispute over iran’s nuclear program may disrupt shipments. iran’s president said last week his country had produced enough enriched uranium to fuel a nuclear reactor. the u.s. and others say the program is a front to develop nuclear weapons. prices also rose after china’s president hu jintao said yesterday his country, the world’s second biggest oil consumer, grew 10.2%, faster than expected. how high is too high? at what point do oil-producing nations worry about damage to the world economy? that’s the question i put today to saudi arabia’s ambassador to the u.s., prince turki al-faisal.
>> we’ve always been worried about damage to the world economy from any high prices in oil and we worked assiduously over the years to try to maintain an acceptable pricing for that very important commodity that suits not only the producers but also the consumers. one of the main objectives of that, of course, is not only to satisfy the wishes or the requirements of the developed world, but it is the underdeveloped world or the third world or the developing countries that are most harmed by the increase in oil prices, because they don’t have the wherewithal to meet those high oil prices. so we worked with all of our allies, whether the united states or europe or china or india or whatever, on worldwide basis, to achieve the acceptable price of oil for consumers and producers.
>> you can hear in the background, i presume that is the call for you.
>> that is the call.
>> we appreciate your staying with us. how much control does opec have over oil prices, of that $70 a barrel, how much can opec influence it?
>> i think not as much as people give it credit for or blame it for. the increase in oil prices has many reasons. high demand in countries like china and india but also in the united states, which is having a very strong economy these days, that is consuming more oil. you have a shortage in refining capacity, which affects the oil prices. you have the problem of the iraq war and the terrorism involved in our part of the world that adds to the uncertainty and so on. and then you have the surcharges that are placed by insurance companies on oil shipments from and transport to. all of these things have combined together to bring up the price of oil to $70 per barrel. there is enough production capacity in the world to meet world demand. there is even a glut in production capacity now to meet world demand. but all these other factors that i mentioned are combining to increase the price of oil.
>> one of the factors that’s driven up the price of oil in recent weeks is concern about what might happen with iran over their nuclear program. is saudi arabia concerned about iran moving ahead with a nuclear program? do you think they might be trying to develop a weapons program? and if the iranians were to withhold oil in reaction to anything that happens at the united nations, how would saudi arabia react?
>> we have been telling the world community and the kingdom that our position on development of nuclear weapons is that the middle east should be free of them and free of the other weapons of mass destruction, whether chemical or biological. and we have told our iranian neighbors that is our position and that we would like them to support our position. the stakes are too high in our part of the world for any of these considerations of development of nuclear weapons or not. i don’t have intelligence reporting on whether iran or is not heading towards nuclear weapons. they say they’re not. and they have signed the n.p.t. agreement along with the other countries in the area, except israel. and therefore, we think the world community should approach this issue from the point of view of ridding, first, the middle east of weapons of mass destruction and making it a uniform policy to rid the middle east of weapons of mass destruction. and then the rest of the world, and not just the middle east. but talk about intentions or aspirations and so on is beyond my knowledge.
>> if iran withheld oil, what would saudi arabia do?
>> we’re producing, at maximum capacity now. we have a program set in motion to increase our production from 10 million to nearly 12.5 million within four years. and hopefully we can achieve that in the allotted time. but tomorrow, we will definitely work with the world community to try to maintain stable price for oil.
>> at $70 a barrel, whatever the reason, the price of oil has certainly swollen saudi arabia’s coffers and other members of opec.
>> we say ahamdarilla.
>> a lot of people have suggested that opec countries, including yours, are going to start diversifying their holdings away from dollar-denominated assets. is that something we should expect? >> i haven’t heard any saudi officials talking in those terms. the dollar has served us very well since 1945 and the bretton woods agreements that made the dollar be the world currency. i don’t see why we should change it. as i told you, i haven’t heard any saudi official saying we are going to go away from the dollar.
>> not necessarily go away from the dollar, but put more money --
>> even that i have not heard.
>> prince turki al-faisal. if president bush is going to fend off efforts in congress to get tough on china over trade, he may need a helping hand this week from the chinese, specifically president hu jintao who. hu meets with president bush on thursday. peter cook has more.
>> america values china as a trading partner, but we expect china to live up to its commitments.
>> president bush has made clear that economic and trade issues will top the agenda when he meets with chinese president hu jintao on thursday. of specific concern, the record $202 billion trade gap with china last year.
>> china needs to take additional steps to address the trade imbalance between our countries and china needs to move to a flexible market -based currency.
>> after ending the yuan’s peg to the dollar last summer, china’s reluctance to take more steps to allow its currency to float more freely remains the biggest trade issue between the two countries. >> the big cheese, of course, is the currency. and it would be a wonderful thing if, in fact, a 10% appreciation was announced. but no one expects that.
>> instead, one analyst expects hu to signal clearly that changes are coming in the future.
>> president hu knows that president bush has tried to keep u.s.-china relations from becoming a target in the domestic political scene in the u.s. and that the chinese side has to deliver something to allow that positive u.s.-china interaction to continue.
>> words without specific action may not be enough to satisfy china’s critics in congress who have threatened trade sanctions if china doesn’t move on its currency. they also want to see progress on intellectual property rights protection and other trade issues. for his part, hu is likely to stress the benefits of chinese economic growth to u.s. businesses, an argument made last week by china’s vice premier during trade talks in washington.
>> to promote the china-u.s. cooperation and trade requires the concerted efforts of both sides. hu begins his trip to the u.s. tuesday with a visit to seattle that includes a tour of a boeing factory and dinner at the home of microsoft founder bill gates.
>> after this break, more on this week’s china summit.
