Photo: ttstam via Flickr
A bipartisan group of Senators are planning on passing a bill rebuking China for its trade and monetary policies in October.Reuters reports:
“Economists of all stripes agree,” said New York Democratic Senator Chuck Schumer, “China illegally subsidizes their industries, they underpay their workers, they skirt environmental regulations and ignore the tenets of global trade rule after trade rule. They get away with economic murder, and thus far our country has said, ‘Oh, we don’t care.”
Obviously, the Senators’ aim is to make a statement about China’s currency manipulation, domestic business subsidies, labour and environmental standards, and alleged violations of trade regulation. The bill is a combination of two pieces of legislation collectively championed by Schumer, Republican Olympia Snowe (ME), Democrat Sherrod Brown (OH), and Republican Lindsey Graham (SC).
Here’s what the bill would actually do if passed:
- The Commerce Department would begin treating currency undervaluation as a subsidy according to US trade law.
- The Treasury would start calling out countries for having “fundamentally misaligned” currencies (one step before manipulated), and trigger actions to address them.
- The US would oppose any rules about IMF structural changes that “misaligned” currency countries support.
For its part, of course, China denies all accusations of currency manipulation or violations of trade law. In fact, they think the accusations are merely an excuse for protectionism.
It’s worth nothing that the President does not support this bill, so maybe he’ll veto it.
And from the looks of things, that’s likely a good thing. To get through the current crises in Europe, the world is going to have to act together. And we need China’s economy robust during this delicate time– it’s already slowing down as it is.
Moreover, the truth is that this potentially toothless statement from Senators is not going to change China’s ways on anything. You know what does though? Taking it to task on substantive issues.
Here’s an example: China already took a step back from its statements demanding that the world recognise it as a full-market economy in exchange for helping the Euro-zone. Why? Because it was afraid that its trade would be harmed as Europeans and Australians slapped it with duties and investigations– not on a litany of charges, but on specific, substantiated trade violations and environmental damage.
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