Hillary Clinton and Barack Obama, the frontrunners for the Democratic presidential nomination, have agreed to co-sponsor legislation that would levy punitive duties on Chinese goods to cajole Beijing into revaluing its currency, according to aides.
The endorsement is a sign that trade with China is emerging as a hot political issue in the upcoming election and increases the prospect of the legislation passing with a veto-proof majority, analysts said.
The bipartisan legislation has been spurred by claims that China’s cheap currency makes its exports more attractive and is contributing to the record annual $232.6bn (£115.6bn) US trade deficit with the country.
The early pledge to vote for the bill will strengthen the candidates’ claims to be defending US manufacturers against what they argue is unfair competition.
A critical stance on US trade policy has become increasingly de rigueur for candidates as the Democratic presidential field tilts towards a populist stance on economic issues.
The bill, introduced by Senators Max Baucus, Chuck Grassley, Charles Schumer and Lindsey Graham, would permit US companies to seek anti-dumping duties on Chinese imports based on the undervaluation of the currency and calls for a trade case to be brought by the US at the World Trade Organisation.
Analysts said the sponsorship of the bill by the two leading candidates made it more likely the US would take a more aggressive stance towards Beijing on trade issues if the Democrats took the White House.
The Senators who introduced the legislation set out the case for the move on Thursday in the Financial Times, arguing that “a little pressure can go a long way to encouraging the right policies.” Although the Senators single out China, they say “tomorrow it could be another economy’s currency, with even more devastating effects”.
They said existing international currency policies are out of date and “pose a serious threat to the global trading system by violating the principles of the International Monetary Fund and the WTO”.
Read the rest of the article in The Financial Times.
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The Bush Administration has been complacent to the creativity of the Chinese, i.e., its currency manipulation is a form of protectionism which short-circuits the economic theory of “Comparative Advantage”. Common sense dictates a U. S. retaliation to this and other forms of negative competition by China.
Our retaliations should be a flexible import assessment (percentages rising/falling with our trade gap) which will deter retaliation by China. The revenue from the import assessment can be used to incentivize exports, e. g. credits for shipping finished goods and select agricultural products over water. Since the Chinese have not been negotiating in good-faith regarding trade, Congress must replace complacency with action.