Importers: China currency bill could spark trade war
The U.S. House of Representatives on Wednesday overwhelmingly approved a new bill aimed at forcing China to revalue its currency.
The Currency Reform and Fair Trade Act (H.R. 2378), threatens trade sanctions against China if the country doesn't take steps to more accurately value its currency.
Most analysts speculated this week that the bill, which now moves to the U.S. Senate, would spark a trade war between the world's two largest economies. News reports from state-owned media outlets in China said pressing China to revalue its currency would not aid the recovery of the U.S. economy and that the move was politically motivated ahead of mid-term Congressional elections in November.
Import trade groups, clearly keen to avoid a rising yuan, also decried passage of the bill.
'We all agree that China should allow market forces to determine the value of its currency, but currency valuation is not a major concern for many American job creators,' said Stephanie Lester, vice president for international trade for the Retail Industry Leaders Association (RILA), in a statement. 'A more pressing concern is the ramifications of an escalating trade dispute that could be disastrous for both of our economies, and outweigh any perceived gains from increased protection for a small number of American companies. For example, China's announcement this week that it would impose tariffs of up to 105.4 percent on exports of American poultry suggests that the risk of U.S. exporters being harmed by a tit-for-tat trade fight over currency valuation is very real.
'Lost in much of the debate on currency is the fact that China is one of the largest and fastest growing markets for American exports. Given our near stagnant economic growth, it makes no sense to provoke tension and erect trade barriers that could jeopardize thousands of American jobs and undermine the president's goal of doubling U.S. exports within five years. Proponents have labeled this bill a job creator — but they fail to take into account the importance of the broader U.S.-China economic relationship and the effect that increased trade tensions will have on our economy. Erecting trade barriers has not been proven to be sound economic policy, and in our current state, such a policy could be hazardous to our fragile recovery.'
American Apparel & Footwear Association's top official sounded a similar note.
“It is unfortunate that the House put political expediency above economic stability today,' said Kevin Burk, AAFA's president and chief executive officer. 'Action on this bill has already primed the United States and China for a widening trade war. The rhetoric associated with Congressional consideration of this legislation threatens American jobs, including jobs in the U.S. apparel and footwear industry, while doing nothing to require China to revalue its currency. Its implementation could put the United States out of compliance with its international trade obligations while subjecting American consumers to higher priced goods.'
Burke said a better strategy would be to focus in the short term on more pressing issues, like intellectual property rights and market access for U.S.-made goods, while devising a long-term strategy to encourage China to revalue its currency.
'Because China is the fastest growing export market for U.S. manufacturers, U.S. farmers, and U.S. brands, erecting additional trade barriers just stifles our competitiveness in the global market,” he said.