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Bill Would Require Tariffs on Chinese Goods if Currency Manipulation Continues |
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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 House bill (H.R. 1498) sponsored by Reps. Duncan Hunter (R-Calif.) and Tim Ryan (D-Ohio) that would define currency manipulation as an unfair trade practice.
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.
For example, between 1997 and 2004, China’s share of the U.S. apparel market rose from 16.7 percent to 24.7 percent. In the same period, its market share in computers/electronics and electrical equipment jumped by 14.9 percent and 8.2 percent, respectively.
EPI economist Josh Bivens, co-author of the policy memo, said:
Our research shows China violated all established currency manipulation standards. China’s currency policy is a primary impediment to resolving economic imbalances that threaten the global economy.
In a letter to The Wall Street Journal in May, AFL-CIO Secretary-Treasurer Richard Trumka said China’s currency manipulation is dragging down America’s middle class:
Seventy percent of China’s FDI (foreign direct investment) is in manufacturing, with heavy concentration in export-oriented companies and advanced technology sectors. The dangers of this model of development are apparent: job and technical capacity loss in the U.S., growing inequality and political and financial instability in China, and the accumulation of nearly $1 trillion in U.S. dollar assets by the Chinese government. This is also a development model based upon the brutal repression of workers’ rights and human rights.
In July, the Bush administration’s U.S. Trade Representative (USTR) rejected for a second time an AFL-CIO petition demanding that the U.S. impose sanctions on China if it did not respect workers’ rights. The petition asserted that systematic violation of workers’ rights in China artificially represses wages, providing an unfair advantage to products made in China.
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