China Update – September 2011

Source:  Joe Borich, Washington State China Relations Council blog, September 21, 2011.

U.S.-China Trade

There is a long and troubling history of efforts by Congress to “fix” our trade with China despite many compelling arguments raised over the years that there is no single, simple fix. Congressional activists start with the presumption that China’s currency is intentionally undervalued (true) and that this alone accounts for our trade deficit with China, most of our global trade deficit, and the loss of American jobs – all highly questionable conclusions.

Congress’ antidote for this is legislation that would make imports from China subject to countervailing duties high enough to price Chinese products out of the U.S. market, unless China substantially increases the value of the Renminbi against the U.S. dollar.

If this proposed legislation – to be taken up by the Senate soon – were to become law, it is almost certain that China would not respond by increasing the exchange rate of the Renminbi against the dollar, at least not at a rate faster than the gradual approach it is now taking. It almost certainly would, however, retaliate by increasing import duties on American exports. The result of all this will not be balanced trade, nor jobs returning to the U.S. In fact, it will lead to more American job losses because sales of U.S. products and services to China – our country’s fourth largest and fastest growing export market – will decline sharply, due to Chinese retaliatory measures.

This is a futile and potentially dangerous game the Senate is contemplating playing. It is especially dangerous to the businesses, farms and workers of Washington State, whose economic well being increasingly relies on our State’s highly beneficial trade relations with China – our largest trading partner and export market. Because of this, the Washington State China Relations Council signed on to a letter prepared by the U.S.-China Business Council and addressed to the Democratic and Republican leadership of the Senate. Please see the full text of the letter below. I would also encourage you to contact your Senators and your House Representative and urge them to vote against this measure.

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