Posted by Consumers for World Trade
Fri, 17 Aug 2007 19:42:00 GMT
Michael Virga
August 17, 2007 - Legislation has been working its way through both the House and Senate recently
with the goal of forcing China to revalue its currency, the Yuan. Lawmakers and
interest groups have been loudly accusing the Chinese government of grossly undervaluing
its currency, thereby contributing to America's trade deficit with the People's
Republic. Their argument is that if the Yuan is artificially cheap, Chinese producers
have an unfair advantage in exporting products that are cheap in the U.S., while
American firms cannot sell their comparatively more expensive goods in China.
However, as is often the case in Washington, some of the outside voices calling
for Congress to punish China have more than America's best economic interests
at heart.
A
recent article on the Washington Post's website by Albert Keidel, former
Acting Director of the Office of East Asian Nations at the Treasury Department,
sheds light on self-serving interests in the financial sector that are advocating
for Chinese currency-change legislation. Keidel explains that American investors
and speculators bought up Yuan-based financial assets following the most recent
economic recession and corresponding drops in American interest rates several
years ago; Chinese financial assets were paying higher interest at the time. However,
fast-forward to the present and the motives of these speculators become quite
clear. If America was somehow able to force China into letting its currency appreciate,
as some proposed legislation aims to do, those individuals and firms holding Yuan-based
financial assets would see their assets' value skyrocket. Think of it this way
- Say you bought a Chinese asset, valued in Yuan, for $100, and then Congress
enacted a bill that caused the Chinese currency to appreciate by 40%: your asset
would be worth $140.
For his part, Keidel does not believe that any legislation will be able to force
China to revalue its currency, and that even if it were possible, a more valuable
Chinese Yuan would not change America's trade deficit with China. In looking at
American trade with China, it is important to realize that American exports to
China are growing at a faster rate than with any other country in the world, creating
jobs in the process. It is also a neglected truth that trade with China allows
Americans to have access to a wide array of affordable consumer goods. However,
the Wall Street speculators calling for Congress to take action against China
are just one voice in a chorus that wants to put protectionism and special interest
before the American people's economic well-being.
Posted in Congress, China | 4289 comments
Posted by Consumers for World Trade
Thu, 02 Aug 2007 18:16:00 GMT
Michael Virga
August 2, 2007 -- China has now become the 4th largest purchaser of our exports. The People's Republic
bought $52 Billion worth of American goods in 2006 - a
32% increase over the previous year. U.S. exports to the world's most populous country are rising five-times
as fast as our exports to the rest of the world, and there is no reason to expect
this trend won't continue. Despite our record-setting sales to China, we are buying
more from China than it buys from us. To some elected members of Congress, this
is just inherently unfair and they are quick to call for putative import taxes
on Chinese goods purchased by American consumers.
The average American family saves when we import goods that are cheaper to
buy abroad than produce at home. In fact, hard working families and the neediest
of Americans stand to benefit the most from our trade relationship with China
since that country has been an enormous source of competitively-priced consumer
goods. It is clear that without this trade relationship hardworking families
would be forced to pay more for the essentials of life.
Instead of recognizing the importance of our trade relationship with China
- both as a growing destination for our exports and the opportunity to offer
millions of needy Americans price savings - Congress appears to be moving towards
imposing putative measures on China. Some of out elected representatives claim
that the Chinese undervalue their currency, the Yuan, to make their imports
cheaper in U.S. markets while at the same time making our exports more expensive
in Chinese markets. Some of these proposals call for import taxes of up to forty
percent on everything Americans buy from China in order to punish the Chinese.
Of course, this proposal will most likely inflate the prices that needy Americans
pay for the essentials of life while doing almost nothing to promote American
exports to China. It is about time the members of Congress consider needy American
consumers in their rhetoric about China.
Posted in Congress, China | 2315 comments
Posted by Consumers for World Trade
Wed, 20 Jun 2007 19:54:00 GMT
Trade with China has has become a hot political issue lately. With its enormous
workforce, The People's Republic has been labeled the Factory to the World sending
about forty percent of its GDP abroad as exports. Here in the U.S., Chinese
sourced consumer goods - everything from advanced electronics to footwear and apparel
- has been responsible for providing Americans with a wide variety of competitively
priced goods that has improved many Americans' stand of living.
This booming trade has not gone unnoticed by our law makers on Capitol Hill
that lament our growing trade ties with China. A cadre of our elected representatives
have claimed that Chinese officials have manipulated their economy specifically
to displace American manufacturing in favor of their own production by undervaluing
their currency, the yuan. That is, the Chinese have been accused of purposefully
undervaluing the the yuan to make their goods cheaper in the U.S. compared to
products made in the U.S. In order to right this perceived wrong, our lawmakers
have proposed policies designed to punish China for its currency manipulation.
Below is a digest of many of these proposals.
Section 301: International trade law, outlined by World Trade Organization
agreements, allow governments to punish trade partners for subsidizing production
that specifically distorts trade through the imposition of additional tariffs
called "countervailing duties (CVD)". In the parlance of U.S. international
trade law, this is referred to as Section 301.
On May 15, 2007, House Ways and Means Trade Subcommittee Chairman Sander Levin
and other lawmakers called the Bipartisan China Currency Action Coalition, filed
a Section 301 petition requesting that the Office of the United States Trade
Representative (USTR) investigate China's currency practices and to file a
WTO case at the end of the investigation. Representative Levin claims that China's
continued undervaluation of the yuan acts as a trade distorting practice designed
to displace domestic manufactured goods in the U.S market as well as inflating
the price of U.S. exports to China.
Currency Reform
and Financial Markets Access Act of 2007 (S. 1677)
Introduced by Sen. Dodd (D-CT) on June 21st, 2007. This bill seeks to amend the
International Economic Policy Coordination Act of 1988, making it easier
for the Treasury Department to identify other countries, specifically China,
that are manipulating their currency. It recently passed a Committee vote of
17-4. Click here
to read CWT's letter.
The
Currency Exchange Rate Oversight Act of 2007 (S. 1607)
Similar to S.1677, this bill was introduced by Senators Baucus (D-MT) and
Gassley (R-IA) on June 13th, 2007. S. 1607 calls on the Department of Commerce
to be more agressive in dealing with countries that manipulate their currency's
exchange rate, namely China. Click here
to read CWT's letter.
Fair
Currency Act (H.R. 782)
Introduced by Rep Tim Ryan (D-OH) on January 1, 2007. The bill proposes to allow
the International Trade Commission to impose countervailing duties on products
from non-market economies. This bill amends the Trade Act of 1974 to include
the exchange rate and currency misalignment by China as a condition to determining
a market disruption which then gives warrant for the countervailing duties.
HR 782 would increase the price consumers pay on a wide variety of products
from non-market economies including China and Vietnam
Fair Currency Act (S 796)- Companion bill to HR 782 (above) introduced
by Sen. Jim Bunning (R-KY).
H.R.
1002:
Introduced by Rep. John Spratt (D-SC) on February 12, 2007. The bill calls for
the unilateral imposition of a 27.5% tariff on all imports from PR China in
retaliation for Chinese undervaluation of the yuan. The bill mandates that this
policy will go into effect unless the President certifies that China is no longer
manipulating the exchange rate. :
Currency
Harmonization Initiative through Neutralization Action Act (H.R. 321).
This bill was introduced by Rep. Phil English (R-PA) on January 9, 2007. This
bill directs the Secretary of the Treasury to annually analyze the exchange
rate policies of China and impose additional tariffs to offset exchange rate
manipulation.
H.R.
1958:
This bill was introduced by Marcy Kaptur (D-OH) on April 29, 2007. This bill
suspends normal trade relations with China for 3 months. It was introduced on
4/19/2007 by Rep. Marcy Kaptur and it has no cosponsors. The bill was referred
to the House Committee on Ways and Means. Without much support this bill is
unlikely to be successful. Most bills do not make it out of committee.
S.571:
This bill was introduced by Sen. Dorgan (D-ND) on February 13, 2007 and is the
companion Senate bill to HR 1958.
Stopping Over Seas Subsidies Act (S. 974):
This bill was introduced by Sen. Susan Collins (R-ME) on March 22, 2007. S 974
calls for the International Trade Commission to determine China's status as
either a market or non-market economy according to whether the government is
providing producers with subsidies. Countervailing duties will be applied to
China if the Commission determines that the country is a a non-market economy.
H.R. 1229: Companion bill to (S 974) above introduced by Rep. Artur
Davis (D-AL) on February 28, 2007. Click here
to read CWT's letter.
H.R.571:
This bill was introduced by Rep. Tom Tancredo (R-CO) on January 18,
2007. Like the previous bills, HR 571 would require additional tariffs to be
levied on imports from non-market economies including China. The funds procured
by the government from the tariffs would be placed into social security.
Posted in Congress, China | 6 comments
Posted by Consumers for World Trade
Fri, 11 May 2007 14:24:00 GMT
Ezra Finkin
May 11, 2007 - Robert Samuelson, the noted economist and columnist, has just remarked on China's
predatory behavior in undermining the U.S. economy and global trade system. According
to his recent column in the Washington Post entitled
China's
Trade Time Bomb, Mr. Samuelson states that China's policy of undervaluing
its currency by as much as forty percent "threatens to wreck the entire post-World
War II trading system." By keeping the value of the Chinese currency low,
Americans are able to purchase an even greater amount of imported consumer goods.
In fact, our appetite for cheap imported goods is so great that it continues to
erode our trade balance, namely the difference between our exports and imports.
According to the article, if we don't do something quick to wean us off our addiction
to Chinese imports, this trade imbalance will throw the U.S. into penury.
How do you do this? By making Chinese imports more expensive. Congress and
the U.S. government are currently considering policies to punish China for its
currency manipulation by claiming that such actions are illegal government subsidies
according to international trade law. As such, the U.S. may impose unilateral
tariffs, or border taxes, on all Chinese products designed to inflate the price
of these goods in the U.S. In theory, as prices rise U.S. consumers won't purchase
as much imports as before and our trade balance will get better so we can all
rest assure that there won't be another Great Depression. However, a more realistic
analysis reveals that unilateral U.S. action to inflate the price of Chinese
imports won't reduce our consumption. Most likely, Americans will buy the same
T-shirts, shoes and electronics as before but at much higher prices. This will
even further inflate the value of our imports worsening the trade deficit.
A much more reasoned approach to improving the trade deficit is to realize
that our trade imbalance has two sides. Instead of punishing consumers for purchasing
imports, our government should focus on efforts to stimulate our exports abroad.
Rising exports also improves our trade balance. By focusing on export promotion,
we can have our cake and it eat too. American consumers get access to cheap
imported consumer goods, American industry gains access to foreign markets for
its products and services and the trade balance doesn't look so bad.
With regards to export promotion to China, the U.S. unfortunately seems keen
to restrict the export of many products to our largest trading partner. The
Department of Commerce is moving full steam ahead on a regulation designed to
stem the sale of many U.S. products to China out of an effort to hinder Chinese
military modernization. Unfortunately, the many parts and components needed
for a modern army are also the same parts and components required for an advanced
industrial economy. This regulation would impose many bureaucratic hurdles involved
in the export of many run-of-the-mill high-tech communication, aviation and
even advanced textile products to China. In all likelihood, the U.S. would loose
market share in these industries responsible for a vital and healthy export
market to our Japanese and European competitors.
Posted in China | 41 comments
Posted by Consumers for World Trade
Mon, 09 Apr 2007 18:20:00 GMT
Robin Lanier, Executive Director
April 9, 2007 -- Every three months the government issues statistics
on the value of imports and exports, and for more than thirty years the news
has been all about the U.S. "trade deficit." Basically, for almost
my working life, the U.S. has imported more than it has exported.
To listen to the trade deficit hawks, this is like the hemorrhaging our national
wealth. These deficit critics have--for as long as I can remember--urged our
policy makers to take steps to turn the deficit around. These days the arguments
center on trade with China--not because the deficit is new, just because China
is now our biggest trading partner and the country with which we maintain the
largest deficit. A decade or more ago, the debate was all about Japan.
Nevertheless, today the deficit hawks out there want us to convert our trade
deficit with China into a surplus.
But how?
One proposal--introduced in Congress last year--would impose a massive 27.5%
tax on all imports from China in an effort to "fix" the perceived
"currency manipulation" that deficit critics say lies at the root
of our trade imbalance with China. Supporters of this proposal claim that China
purposely undervalues its currency in order to keep its exports competitively
(some would say "unfairly") priced. But the basic idea of the 27.5%
import tax is to discourage Americans from purchasing Chinese products by making
them a lot more expensive.
The latest proposal comes from the Bush Administration. The Department of Commerce
has recently announced that it may consider treating China's currency policy
as a kind of "unfair" subsidy. The latest proposal would impose something
called "countervailing duties"--just another name for high tariffs--to
make Chinese exports more expensive and to discourage consumers from buying
them. The Commerce Department apparently believes that the high border tax will
"level the field," making sure that the "subsidy" is erased.
It all sounds faintly justified until you stop and think that proponents of
this policy want to tax every blessed thing that comes from China, including
products like shoes, clothing, home electronics, not to mention tools, ceiling
fans and a wide variety of things you might find at a variety store. Basically,
if you put it on or turned it on this morning, chances are it was made in China,
and the some folks in government would like to tax it.
Many of these items--shoes come immediately to mind--aren't even made in the
U.S., so this is not about protecting U.S. industry. It's about imposing some
kind of neat little ledger balance that says our exports have to equal our imports.
Ironically, these proposed taxes won't stop Americans from buying necessities
like shoes. They will probably make other import suppliers more competitive--so
your shoes might come from Bangladesh or India or Viet Nam instead of China--a
move that will do nothing for the trade deficit. These taxes are unlikely to
move shoe manufacturing back to the U.S. And no one seriously believes that
the U.S. could ever become a competitive world supplier of shoes. Shoe manufacturing
isn't our "comparative advantage." We are much more likely to compete
on high tech or agriculture. So imposing a neat little trade ledger balance
isn't really going to do anything positive for the economy.
One thing is absolutely certain, though, taxing imports will make these products
more expensive for every one in America.
If our elected officials truly believe in achieving a trade balance, perhaps
they should focus less on punishing American families for buying shoes and socks
and spend a little more time promoting U.S. exports abroad. The Bush Administration
has focused its export promotion strategy in concluding a string of Free Trade
Agreements (FTAs) with over 20 developing economies. While a step in the right
direction, the Progressive Policy Institute concludes that together, these recent
FTAs only account for about 12 percent of U.S. trade.
Posted in Congress, China, Clothing | 142 comments
