BIZCHINA / Center
Penalizing China to hurt US
(Agencies)
Updated: 2007-06-15 10:26
The growing sentiment in the US Congress to penalize China for its
currency policies might lead to serious consequences for both countries,
economist said.
US lawmakers Wednesday unveiled legislation which would punish countries
with "misaligned" currencies, hours after the Treasury stopped short of
branding China a "currency manipulator," a designation that could lead to
economic sanctions.
The Treasury report said the policies have left the Chinese yuan
undervalued but that US officials could not conclude that this was a
result of a deliberate effort to gain an unfair trade advantage.
This failed to assuage lawmakers who claim the yuan is undervalued by as
much as 40 percent, and contend this is a key factor in the loss of US
manufacturing jobs and a 232.5-billion-dollar bilateral trade deficit
last year.
"This bill requires the Treasury Department to take firm but fair action
when other nations play games with the US dollar," said Senate Finance
Committee chairman Max Baucus.
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The committee's top Republican, Senator Charles Grassley, denied the bill
was specifically targeted at China.
"We are not picking a fight with anyone. Twenty years ago this
legislation could have applied to Japan, tomorrow it could apply to
country 'X.'"
Many economists say such measures would be counterproductive and threaten
the growing ties between the two economies on trade and investment.
"These kinds of punitive measures would be shooting ourselves in the
foot," said Nariman Behravesh, chief economist at the research firm
Global Insight.
"It would hurt our trade relationship, and hurt the willingness of the
Chinese to invest in the US. There's no question that China has become
the favorite scapegoat in the same way Japan was 20 years ago."
Beijing has promised to "respond" to any new measures, and some fear a
downward spiral of protectionism if the bill succeeds.
"Protectionism begets protectionism, and any attempt by the United States
to limit market access or impose higher costs on imports is likely to
provoke similar measures from other parts of the world," said Joseph
Quinlan, market strategist at Bank of America.
"Tit-for-tat protectionism would benefit no one, especially not the US
multinationals presently enjoying the best of both worlds."
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