Is The Chinese Currency Bill A Cure Or A Distraction?
The U.S. Senate adopted a bill on Oct. 3, targeting at Chinese currency value to bring jobs back from China, despite the Chinese government’s warning of the trade war the bill could trigger.
The bill would impose tariffs on certain Chinese goods as a punitive countermeasure for China’s manipulation of its currency. Supporters of the bill persist that Chinese currency is artificially undervalued by 25 percent to favor Chinese exporters, whose cheap goods cost millions of jobs in the U.S.
According to a study released on September 20, 2011 by the Economic Policy Institute, the U.S.-China trade deficit has eliminated or displaced nearly 2.8 million U.S. jobs, of which 70 percent were in manufacturing.
Supporters also point to studies by the Peterson Institute for International Economics that say a 20 percent appreciation of the yuan would reduce the U.S. trade deficit by up to $120 billion and create a half-million U.S. jobs, according to The Associated Press.
Opponents of the bill however, don't think the bill will be a cure for unemployment and may risk worsening U.S- China trade relationship.
One of the arguments opponents hold is that with the increasing cost of labor in China, manufactures have already stared to move their factories out of China to other Southeast Asian countires. The appreciation of Chinese currency won’t necessarily create jobs in the U.S.
According to the statics released by the U.S Census Bureau, the trade deficit with China in 2011 is more than $160 billion, a decrease compared with that of $273 billion in 2010. U.S. unemployment is stuck above 9 percent.
Critics also say that the bill was to distract attention from the urgent need for U.S to fix its own problem.
"It's like we know what we've got to do but we won't do it," said Sen. Bob Corker (R., Tenn.). "It's like we've got to find a bogeyman."
Some also fear China would fight back by retaliating against U.S. exports to China. The Chinese government would even slow the currency’s current rise against U.S dollar, which is about 10 percent a year, taking Chinese inflation into account.
China’s central bank, foreign ministry and commerce ministry all responded strongly to the bill, arguing the bill is trying to use China as a scapegoat for the economic problems of America's own making. China's Foreign Ministry said the bill violates rules of the World Trade Organization and that if passed, U.S.-China economic and trade relations would be severely affected, according to Xinhua News agency, the official news agency of China.
A final Senate vote on the measure is expected next week. Some senators predicts it will fail since the debate between the proponents and opponents has been going on. Senate Minority Leader Mitch McConnell a Kentucky Republican said so on Wednesday night when asked on CNBC about the bill’s prospects. “It’s probably not going anywhere. … The China currency bill is highly unlikely to pass.” Said McConnell.
Jonathan Arson, a professor of International trade at USC thinks the bill will influence the Sino-U.S trade balance only if it’s passed into law. “But it’s unlikely,” said Arson, “The House and White House don’t want to press China this way. It’s just a Senator’s game to win points at home.”
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