By Steve Holland
RACINE, Wisconsin (Reuters) - U.S. President Barack Obama on Wednesday maintained pressure on China to ensure its currency policy did not give it an unfair export advantage.
"We've got to make sure that countries we're trading with are being fair. I believe in free trade," Obama said at a campaign-style meeting in Racine, Wisconsin.
"For example, if China has a currency that's undervalued, that makes our exports more expensive. It makes their imports cheaper. So we've been putting pressure on them to say, you know what, let's make sure that we're not favoring one side or the other in this trade deal," he said.
China has announced plans to allow its currency to be more flexible, and Obama said at a weekend Group of 20 meeting in Toronto he believed the yuan would rise significantly.
During the summit he also announced a new push on a long-stalled trade deal with South Korea.
The United States argues the yuan is under-valued by up to 40 percent against the dollar, claiming this makes its exports unfairly competitive and effectively poaches American jobs.
Trade is a delicate topic for Obama, whose Democratic Party draws support from organized labor, which complains that trade deals with Mexico and Canada have hurt U.S. workers.
Racine, perched on Lake Michigan and with unemployment above 14 percent, typifies middle-American communities where employers have been hit by cheap imports and the loss of jobs overseas -- a fact Obama acknowledged.
"It is absolutely true that a lot of our manufacturing left to go to China and other low-wage countries," Obama said.
Jobs, and a general wariness toward free trade agreements with foreign countries, will be a crucial factor in U.S. mid-term congressional elections on November 2, when anger over still-high U.S. unemployment could erode the power of Obama's Democrats.
The Obama administration must also deliver a semi-annual currency report to the U.S. Congress that could name China a currency manipulator, although the odds of it embarrassing China this way have shrunk since Beijing made the yuan move.
The report, which is the task of U.S. Treasury Secretary Timothy Geithner, was delayed from a mid-April release until after the G20, and could now come at any time.
(Writing by Matt Spetalnick and Alister Bull, editing by Cynthia Osterman)