How to tackle trade deficit with China
Bush and Congress are divided as Chinese and US officials hold talks this week in Washington.
from the May 22, 2007 edition
Page 3 of 3
But supporters of a stronger yuan, including labor unions and many small manufacturers, say it would also make US exports more competitively priced in Asian markets. And if it curbs American demand for Asian imports, that could help the US economy shift to a more sustainable path. They say America now imports too much and saves too little money.
"We need to proceed on several fronts," says Robert Scott, a trade expert at the Economic Policy Institute, a labor-allied research group in Washington. The White House has "been almost completely silent on this issue until just this year when the Democrats took control of Congress."
He urges stronger action by the administration to penalize China for illegal subsidies and more pressure to remove Chinese barriers to US exports, as well as addressing currency manipulation.
It's not clear whether legislation will pass in the current Congress, but analysts say the prospects have improved with the Democratic victories in last fall's elections.
The Fair Currency Act of 2007, the proposed measure to penalize "exchange-rate misalignment," has 100 bipartisan cosponsors led by Reps. Tim Ryan (D) of Ohio and Duncan Hunter (R) of California.
The tussling is not just between Congress and President Bush, but between global corporations and domestic interests.
China's export growth has been propelled by multinational corporations. Exports of foreign affiliates operating in China – mainly US and European companies – accounted for 58 percent of Chinese exports in 2006, up from 40 percent in 1996, according to research by Bank of America in New York.
These companies are generally reaping big profits in China and see much to gain by growing international trade. Hotly debated, however, is whether such trade has done much for US workers. "Corporate interest has diverged from the national interest," says Mr. Scott.
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