Australia Urges ‘Cool Heads to Prevail’ in U.S.-China Dispute

Michael Heath

(Bloomberg) -- Australia called on the U.S. and China to negotiate a resolution to their economic conflict, with Treasurer Josh Frydenberg describing the introduction of currencies into the dispute as an “unwanted escalation.”

In a television interview Wednesday, Frydenberg avoided answering a question on whether the U.S. was right to brand China a currency manipulator. “It’s not for Australia to say which side is right and which side is wrong,” he said. “What Australia wants is for the international rules-based framework to be maintained.”

Chinese policy makers on Monday allowed their currency to depreciate through the symbolic 7-per-dollar mark, preemptively helping offset the cost of a 10% tariff President Donald Trump last week said he will impose on some $300 billion in Chinese imports Sept. 1.

Beijing denied it was depreciating its currency, helping stabilize markets. Yet the dispute is moving into territory that lends itself to escalation.

“Australia is calling on cool heads to prevail and obviously for the parties to negotiate a resolution of this dispute,” Frydenberg said, noting one-in-five jobs Down Under relate to trade. “Certainly the currency move by China and the increase in tariffs by the U.S. is an unwanted escalation.’’

He said that while the U.S. designation of China would see the matter referred to the International Monetary Fund, it doesn’t have the power to force a change in currency policy.

Still, he noted that central bank governors and finance ministers at their recent meeting in Japan “all agreed -- and China was there and the U.S. was there -- that countries wouldn’t be using their currency for competitive advantage,” Frydenberg said. “So that is the Australian position and one hopes that is also the position of the other countries that signed onto that document.”

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