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Volume 17, Issue 47
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Monday, March 8, 2010
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House Members Call for Action on Chinese Currency, Warn of WTO Case, Tariffs
A bipartisan group of at least two dozen members of the House of Representatives is expected to soon send to Treasury Secretary Tim Geithner and Commerce Secretary Gary Locke a letter calling for a series of actions to address the alleged undervaluation of China’s currency. The House letter follows a similar but more limited appeal from a group of 15 senators.
The language of the House letter indicates that the valuation of the Chinese yuan, which had faded somewhat as an issue of concern among lawmakers over the past year or so, is re-emerging. “It is imperative that we address this paramount trade issue with all available resources,” the letter declared. “The impact of China’s currency manipulation on the U.S. economy cannot be overstated. ... U.S. exports to [China] cannot compete with the low-priced Chinese equivalents, and domestic American producers are similarly disadvantaged in the face of subsidized Chinese imports.”
Given this situation, the representatives asked Treasury and Commerce to take the following steps.
• DOC should apply the U.S. countervailing duty law to address China’s exchange rate misalignment, which meets all three parts of the test to identify the presence of a subsidy that is countervailable under World Trade Organization rules: it involves a financial contribution from the government, it confers a benefit and it is specific to an industry or a group of industries.
• Treasury should label China as a currency manipulator in its next semiannual report on foreign exchange rate practices and then enter into negotiations with China regarding its foreign exchange regime. “These combined actions will signal the government’s willingness to take decisive action against China’s currency manipulation,” the letter asserted, “including the potential filing of a formal complaint with the World Trade Organization.”
• The above actions should be taken “in concert with intense diplomatic efforts” with China, the International Monetary Fund and other countries. “Through a combined strategy of legal action and international pressure,” the lawmakers argued, “it is possible China will revisit its undervaluation” of the yuan.
• If these efforts are not successful, the Obama administration should consider “all the tools at its disposal, including the application of a tariff on Chinese imports.”
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