Bill Would Require Tariffs on Chinese Goods if Currency Manipulation Cont

[Omaha Steve]

http://blog.aflcio.org/2006/09/26/bill-would-require-tariffs-on-chinese-goods-if-currency-manipulation-continues/

Bill Would Require Tariffs on Chinese Goods if Currency Manipulation Continues

by James Parks, Sep 26, 2006

The Senate could vote by the end of this week on legislation (S. 295) introduced by Sens. Charles Schumer (D-N.Y.) and Lindsey Graham (R-S.C.) that would impose a 27.5 percent tariff on all Chinese imports if that country does not raise the value of its currency.

By deliberately undervaluing its currency, the yuan, the Chinese government exports products at an artificially low price—running up the U.S. trade deficit and costing good American jobs.

An AFL-CIO report shows China’s fixed currency rate artificially lowers the price of its goods by 40 percent and subsidizes exports, putting U.S. companies at a disadvantage. The lack of currency flexibility has been a major factor in U.S. job losses and a trade deficit with China that hit $201 billion last year.

In a Sept. 21 letter to the Senate, AFL-CIO Legislative Director William Samuel writes:

Currency manipulation is an unfair trading practice that helps fuel the deficits. The Chinese government’s manipulation of its currency places U.S. manufacturing at a significant and unfair competitive disadvantage against Chinese products.

By authorizing the 27.5 percent duty that S. 295 would place on Chinese imports into the U.S., our government will be sending a strong signal that China must end its illegal trade practice and revalue its currency.

The AFL-CIO also is backing a similar House bill (H.R. 1498) sponsored by Reps. Duncan Hunter (R-Calif.) and Tim Ryan (D-Ohio).

In 2005, the U.S. trade deficit with China reached a staggering $201 billion, a record that will be shattered in 2006. In addition, the 2005 U.S. current account deficit—the measure of foreign trade that covers not only goods and services but also investment flows between countries—rose to a record $791.5 billion. It is on a course to reach $900 billion this year.

A new policy memo by the Economic Policy Institute (EPI) shows China’s currency manipulation has enabled it to dramatically increase its exports to the United States in the past nine years and has reduced the market share of U.S. manufacturers who either laid off workers, closed down or moved offshore.

FULL story at link above.

[robcon]

1. poking our own eyes out

Ok, let me understand - we want to raise prices on an enormous array of goods from China to spite the fact that China has been subsidizing those imports by keeping the yuan low.

I can't think of a single reason for this bill.

[Poppyseedman]

2. From the article

"By deliberately undervaluing its currency, the yuan, the Chinese government exports products at an artificially low price—running up the U.S. trade deficit and costing good American jobs"

The trade deficit is not that big of a deal. The way we calculate the balance does not include "services" only goods. So the billions of dollars Microsoft get from it's "services" over seas are not factored into the trade deficit numbers.

By artificially undervaluing the yuan, the Chinese are able to keep the global markets playing field to their advantage as to support their economic growth. Without the cheap yuan, they become more uncompetitive in the world markets.

Bottom line is: This bill will never see the light of day, but it does send a message to the Chinese, stop jerking us around, you need us a lot more than we need you. We have the ability to turn our economy on a dime to produce what we want, the Chinese don't.