WASHINGTON – The Obama administration declined Thursday to cite China for manipulating its currency to gain unfair trade advantages against the United States.
But the administration did conclude that the Chinese currency is undervalued against the dollar, in a report that it is required to send Congress.
The report noted that China on June 19 announced it was introducing more flexibility into its currency system. After showing no movement against the dollar since mid-2008, the Chinese renminbi, also called the yuan, has risen about 0.8 percent against the dollar since Beijing's June announcement.
In a statement, Treasury Secretary Timothy Geithner said the administration will be watching the currency changes closely in coming months. The administration is required to issue the currency report every six months.
"What matters is how far and how fast the renminbi appreciates," Geithner said. "We will closely and regularly monitor the appreciation of the renminbi and will continue to work towards expanded U.S. export opportunities in China that support employment in the United States."
Lawmakers on Capitol Hill criticized the findings. Some vowed to push legislation to impose stiff penalties on Chinese imports if China does not move more quickly to revalue its currency.
Sen. Charles Schumer, D-N.Y., one of China's leading critics in Congress, said he plans to seek a vote on his legislation at the earliest opportunity.
"This report is as disappointing as it is unsurprising. It's clear that it will take an act of Congress to do the obvious and call China out for its currency manipulation," Schumer said in a statement.
Senate Finance Committee Chairman Max Baucus, D-Mont., who is not signed on to Schumer's legislation, said the administration must be aggressive in pushing China on the currency issue.
"A few weeks ago, China took a small step ... but small steps are not enough," Baucus said in a statement. "China must take significant steps to appreciate its currency and I expect those steps to happen soon."
House Ways and Means Committee Chairman Sander Levin said that the slight appreciation of the yuan since June 19 was clearly not enough. He said unless Beijing allows its currency to appreciate much further, the administration should consider bringing a trade case against China before the World Trade Organization, the Geneva-based organization that oversees global trade rules.
"There is no real question that China's exchange rate policy is unfair, contributes to global trade imbalances and costs the United States jobs and economic growth, particularly in the manufacturing sector," Levin, D-Mich., said in a statement.
American manufacturers say the Chinese currency is undervalued by as much as 40 percent. They contend that this undervaluation is a key reason for America's huge trade deficit with China, the largest with any country. It is also a factor in the loss of millions of American manufacturing jobs over the past decade, they say.
Scott Paul, the executive director of the Alliance for American Manufacturing, said that the Obama administration will never achieve its goal of doubling U.S. exports unless Washington takes more forceful action against China.
"It's clear that China's announcement last month was nothing more than a charade, but the administration seems to have fallen for this rather unbelievable promise," Paul said. "Congress must pass strong legislation to address China's currency manipulation."
Eswar Prasad, an economics professor at Cornell University who specializes in trade, said that with U.S. unemployment remaining high in an election year, Congress will be unable to resist the temptation to boost tariffs on Chinese goods unless Beijing allows more revaluation of its currency.
A finding by the administration that China was manipulating its currency would have triggered negotiations between the two countries that could have eventually led to the imposition of higher tariffs on Chinese imports.
A stronger Chinese currency would make U.S. goods cheaper in China and would make Chinese goods more expensive for American consumers. That would boost U.S. exports to China and help dampen demand among American consumers for Chinese products.
However, many private economists argue that there are a variety of reasons for America's huge trade deficit with China. A change in the currency values would have only limited impact on the deficit, they say.
The new currency report had been scheduled for release in mid-April. But Geithner delayed its release until after last month's Group of 20 conference of major economic powers.
Geithner's action was widely seen as an effort to give China more time to resume allowing its currency to rise in value against the dollar without seeming to bow to outside pressure.
President Barack Obama, who met with Chinese President Hu Jintao in Toronto, later told reporters that the "proof of the pudding is going to be in the eating" on China's new pledge of a more flexible currency.
THEODORE, Ala. – BP and the federal government are offering a ray of hope in a summer of setbacks for crews trying to stop the gulf oil spill: The first of two relief wells could be done by the end of this month, weeks ahead of schedule.
But officials are quick to say that meeting such an optimistic timetable would require ideal conditions every step of the way, something that has rarely happened since the gusher began more than 2 1/2 months ago a mile below the water's surface.
It would not be the first time that BP's efforts to stop the leak have fallen short. So is BP setting itself up for failure again?
"BP's credibility is basically shot," said Jefferson Parish Council Chairman John Young. "I hope they plug it as soon as they can, but I'm not holding my breath. They're unreliable and they haven't been transparent or open."
Several times in the past week, BP Managing Director Robert Dudley has said drilling for a relief well is making fast progress and could be done before August.
But he's quickly made a caveat: Everything would have to go flawlessly, something he considers unlikely especially during hurricane season.
"In a perfect world with no interruptions, it's possible to be ready to stop the well between July 20 and July 27," Dudley told The Wall Street Journal. He made similar remarks to the Houston Chronicle in a story published July 2.
Retired Coast Guard Adm. Thad Allen, the Obama administration's point man on the crisis, has confirmed that the operation is ahead of schedule, but he won't budge from the expected August completion date.
"There are certain things that can move that date up, but my official position is the middle of August," Allen said Thursday.
BP originally thought the work would be done even earlier. In a permit filed in April with the U.S. Minerals and Management Service, the company predicted the relief well would be finished by July 15.
The relief well is currently the best hope for stopping the leak. Allen said Thursday it is expected to intercept and penetrate the pipe from the Deepwater Horizon rig about 18,000 feet below sea level in seven to 10 days. The drilling crew is attempting to hit a target the size of a dinner plate at a depth where water pressure is great enough to crush a submarine.
But crews will not know how long it will take to stop the oil until they get there. Because the gushing well essentially is composed of pipes within pipes, oil could be coming up through multiple layers, Allen said.
The plan is to inject heavy mud and cement into each layer of the pipe, if needed, to overcome the pressure of the huge oil reservoir below.
Meanwhile Thursday, the Obama administration asked BP to describe its plans to speed up the connection of a new containment vessel and cap at the well site to collect more of the spewing crude. A short window of good weather is expected over the weekend to get it done.
The possibility of a July finish for the relief well might boost the company's stock price in the short run, but the oil leak is such a costly catastrophe that longer-term gains are harder to project.
For the region, the bottom line remains the same: An estimated 68 million to 169 million gallons of crude have gushed into the Gulf since April 20. And a few days' difference matters less than the prospect of stopping the leak for good.
The gushing oil leak began April 20 after an explosion destroyed the drilling rig and killed 11 workers.
BP and federal officials have reported steady drilling progress for days. But Allen found himself having to discourage speculation about a July 27 completion date after Dudley's comments.
Company spokesmen said Dudley's remarks were not new, but reflected the likely schedule under ideal circumstances.
"That's the absolute best-case scenario," spokesman Daren Beaudo said.
As the drill gets closer to the well pipe, the work becomes more delicate, and any mistake becomes nearly catastrophic. That's why Allen and BP are sticking to August as their target.
"If it happens sooner than that, I think we can all jump for joy," he told reporters Thursday.
Weather is another factor. Drilling has not been stopped by the choppy seas and brisk winds that have bedeviled some of the cleanup and containment operations on the Gulf. But a major tropical storm or hurricane nearby would shut drilling down.
"We're a bit ahead of schedule, but it just takes one storm to change that," BP spokesman Scott Dean said.
Shaving even days off the mid-August timeline would stop millions of gallons of oil from escaping into the Gulf, but its effect on BP's immediate fortunes is less clear.
The company's stock has nearly achieved a second consecutive weekly gain as the wells get closer to the leak. BP also plans to report its second-quarter earnings July 27, one of the dates that's been floated as a possible target for completion of the wells.
Whether the drilling is complete by July or August may not make much difference to investors, said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University.
"I'm sure it will give them a little bump in their stock price," he said of the possibility of an earlier completion. "But two weeks one way or the other is pretty much baked into a lot of investor expectations at this point."
Those investors are counting on the relief well being the final fix, but there are backup plans, Allen said Thursday.
"I think we've found out so far you need a backup to the backup if you can in responding to this crisis," he said.
One backup considered by BP is using a pipeline to transfer oil from the Deepwater Horizon site to non-producing wells within two to 10 miles away.
"They'd actually divert that flow into those pipelines and run it across the floor of the Gulf of Mexico into wells that are not producing now," Allen said. "That would take some construction and some time. It would probably move us into the late August timeframe."
Donald Van Nieuwenhuise, a University of Houston geology professor who has worked as a lead geologist on several offshore drilling projects, said transferring oil to nearby non-producing wells would take time but would avoid the need for surface vessels and possible storm interruptions.
Van Nieuwenhuise said the process is a variation on a common procedure.
"It's easy," he said. "It's just not quick. You have to put more equipment on the (sea) floor."
But the idea outlined by Allen apparently calls for storing the oil with gas and water from the gushing well in a different well so it could possibly be separated and removed at a later date, according to Van Nieuwenhuise.
"Producing the oil now is not something they need to be worried about while they're trying to get oil out of the Gulf," he said.
Breen reported from New Orleans. Associated Press writers Vicki Smith and Greg Giuffrida in New Orleans, and AP Energy Writer Chris Kahn in New York also contributed to this report.
MELVILLE, N.Y. – Semiconductor distributor Nu Horizons Electronics Corp. reported a first-quarter profit Thursday, as recovering demand among businesses for new technology helped it recover from a loss a year earlier.
Shares spiked 9 percent in electronic trading after the market closed.
For March through May, Nu Horizons said it earned $3.4 million, or 18 cents per share. In the year-ago quarter, the company lost $944,000, or 5 cents per share.
Revenue jumped 43 percent to $210.8 million from $147.8 million in the same period last year.
Nu Horizons was one of many technology companies to benefit as businesses began replacing old computers, servers and other equipment once the worst of the recession passed.
The company had ended a distribution agreement with chip maker Xilinx Inc. on June 5, after the quarter had ended. Xilinx products accounted for 32 percent of the company's total sales in the previous fiscal year. In the fiscal first quarter, Xilinx products made up about 29 percent of Nu Horizons' revenue.
"In order to remain profitable without Xilinx, the company will have to continue to increase sales in future quarters," Nu Horizons CEO Martin Kent said.
The company said Thursday it secured a new $80 million loan.
Company shares rose more than 9 percent, or 29 cents, to close at $3.35 Thursday, and another 9 percent to $3.65 in electronic trading after the markets closed.