• Thomas Russell

Senate considers punishing China for undervaluing currency

Observers differ over whether it would help or hurt U.S. jobs

A battle is brewing in Washington involving proposed legislation that would punish China for undervaluing its currency.

The Senate voted on Monday to move forward with S. 1619, which would reinforce the U.S. Department of Commerce's ability to investigate alleged Chinese government subsidization of industry and to determine the magnitude that the Chinese government is manipulating its currency, the yuan.

It also would address alleged shortcomings in the U.S. Treasury Department's exchange rate oversight.

Officials said the bill also seeks to use countervailing and antidumping duties as leverage to pressure China into letting its currency float more freely.

The bill was introduced by Senators Sherrod Brown (D-Ohio), Lindsey Graham (R-S.C.), Olympia Snowe (R-Maine), Debbie Stabenow (D-Mich.), Jeff Sessions (R-Ala.), Robert Casey (D-Pa.) and Richard Burr (R-N.C.).

The goal is to support domestic producers whose businesses are challenged by unfairly priced imports.

"China's dilatory stance on illegal currency undervaluation reinforces the need for the Senate to act promptly," the Washington-based Fair Currency Coalition said in a statement. "While China refuses to honor its World Trade Organization commitments, millions of American jobs lost to subsidized Chinese competition have gone unrecovered, and the U.S. debt continues to soar. American businesses, farmers, and workers cannot afford more delay. They need action now by the U.S. government to stop currency undervaluation."

The groups attached a petition in support of the bill that was signed by 129 national and state business, labor and agricultural groups and 333 companies from 40 states.

Late Monday, however, the National Retail Federation fired back a rebuttal, saying that the measure threatens U.S. jobs.

"This misguided legislation could turn out to be the opening salvo in a trade war with China," NRF Vice President and International Trade Counsel Erik Autor said in a statement. "The gains in jobs that could be seen are minimal at best, and billions of dollars in trade and employment at American companies that do business with China would be put at risk. It would do nothing to reduce the trade deficit because trade would simply move to other Asian countries."

The NRF believes the yuan should float more freely. However, it believes the issue should be handled through more diplomatic channels. It also believes the legislation could have a detrimental effect on other industries already selling into China.

"This legislation would likely violate World Trade Organization rules, allowing China to retaliate against U.S. companies doing business in China," Autor added. "China could take official moves such as challenging the United States at the WTO, filing trade actions against U.S. exports, or unofficial moves such as slowing down license applications or buying Airbus jetliners rather than Boeing."

On Monday evening, the Senate voted 79 to 19 on a procedural measure that would move the bill into more formal discussions in the Senate.

Thomas RussellThomas Russell | Associate Editor, Furniture Today
trussell@furnituretoday.com

I'm Tom Russell and have worked at Furniture/Today since August 2003. Since then, I have covered the international side of the business from a logistics and sourcing standpoint. Since then, I also have visited several furniture trade shows and manufacturing plants in Asia, which has helped me gain perspective about the industry in that part of the world. As I continue covering the import side of the business, I look forward to building on that knowledge base through conversations with industry officials and future overseas plant tours. From time to time, I will file news and other industry perspectives online and, as always, welcome your response to these Web postings.

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