Washington—While The House of Representatives’ 348 to 79 vote Wednesday in favor of the Currency Reform for Fair Trade Act has sparked talk of a “trade war” between the United States and China, the bill is also creating a “rift between America’s manufacturers and retailers, who while they have to continue to work together, stand on opposing sides of the issue,” according to a report in Business Daily News.
Manufacturers view the bill as a move to level the playing field between American and Chinese manufacturing by deterring China from manipulating its currency, which allows it to produce products more cheaply. U.S. retailers contend the law would violate World Trade Organization rules and expose U.S. exports to retaliation while doing little to persuade China to change.
“You can’t shop at Walmart if you don’t have a job”
The bill, if passed by the Senate and signed into law by President Obama, would allow the United States to impose sanctions against its trade partners for allegedly manipulating their currency, a move Chinese officials say indicates rising U.S. trade protectionism. Retailers fear that if passed many of the lower priced Chinese-made products they sell will increase in price at a time when consumers are already being frugal in their spending.
Several manufacturing associations which supported the House vote are urging the Senate to follow suit and pass the bill.
“The House of Representatives sent a clear message to Beijing: Stop your cheating,” Scott Paul, executive director of the Alliance for American Manufacturing (AAM), said in a statement Wednesday. “America’s workers and businesses deserve a level playing field, and passing this bipartisan bill is a significant step in that direction.”
With Congress heading in to November elections and the American public indicating they are concerned about the economy and the 9.6% unemployment rate, the bill is one of the few in recent months that has enjoyed overwhelming bipartisan support.
The AAM argues that the United States has lost 2.4 million jobs since 2001 due to the trade deficit with China, and contends the proposed law would force fairer competition between American and Chinese manufacturers.
“It’s never been clearer that China responds to pressure,” Paul said. “The Yuan is the one currency in the world that’s pegged to political pressure. The lesson is clear: We need to keep the heat on.”
Nonetheless, National Retail Federation (NRF), which had implored the House to reject the China currency bill, saying it would only hurt U.S. exporters.
“It makes little sense to give China a legitimate reason to retaliate against U.S. exports or an excuse to hassle U.S. businesses with no prospect that this legislation would be effective,” said Steve Pfister, NRF senior vice president for government relations.
“While we agree that the Chinese currency needs to move toward a market-determined exchange rate, H.R. 2378 would be ineffective in addressing the currency issue and would create significant costs for U.S. companies and workers in retail and other industries,” Pfister said in a statement. “This bill cannot provide effective leverage over China to resolve the currency issue or have any positive impact on either the trade deficit or U.S. jobs.”
The bill, which would allow the Commerce Department to impose higher duties on imported Chinese products than it does under existing rules, “is simply the wrong tool to address a large, macroeconomic issue such as currency policy in a trading relationship worth hundreds of billions of dollars,” Pfister said.
NRF wants the currency issue to be resolved through multilateral and diplomatic channels such as the G-20, the IMF and the U.S.-China Strategic and Economic Dialogue.
Senate to Take Up Bill After November Election
The U.S. Chamber of Commerce and the American Apparel and Footwear Association (AAFA) also opposed the currency bill, and wrote lawmakers before the vote saying passage may lead to retaliation against businesses with investments in China or exporters of farm and manufactured goods.
“The United States should work with the multilateral community to find long term solutions for currency misalignment, including persistent problems relating to China’s undervalued currency,” said Kevin Burke, AAFA president and ceo, today. “Likewise, we should focus our energy on constructively solving other very real problems that exist in our trade relationship, such as intellectual property rights enforcement and expanded market access, which also hinder job creation in the United States. 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.”
Manufacturers associations, such as AAM, aren’t completely unsympathetic to the retail associations’’ position. “You can’t shop at Walmart if you don’t have a job,” Paul added.
The American Chamber of Commerce in China, which represents 1,200 companies, appealed to the Senate today to kill the currency bill, saying it would unlikely to produce significant U.S. job growth and might harm American exporters.
The Senate is expected to take up its version of the bill after a November election.
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