Pushing yuan bill risks trade war
Updated: 2011-10-04 07:47
BEIJING - With chronic financial ailments and persistent high unemployment driving thousands of protesters to the streets in New York and 50 other cities, some US lawmakers are, tediously, again trying to blame the Chinese currency instead of addressing the real reasons for the country's economic woes.
After a procedural vote Monday, the US Senate is expected to debate a bill which, if passed, will empower US companies to seek retaliatory tariffs on goods imported from countries whose currencies they deem "undervalued."
If these US politicians, who have been inculcating their constituents with the idea that appreciating the Chinese currency is the panacea for American unemployment, successfully push through the bill, their moves are very likely to backfire, ramping up possible waves of trade protectionism that would favor nobody.
It's crystal clear that labeling China as a "currency manipulator" is just a cheap excuse for some in Washington to launch a protectionist war.
It is also unfair and unwise to try to make China a scapegoat for the economic problems of America's own making. The United States has to look inward to revive its economic growth.
In fact, no country would have a soberer recognition than the United States that drumming up trade protectionism in a time of global economic slowdown is the last thing to try.
Washington had learned that painful lesson back in 1930 when Congress passed the Smoot-Hawley Tariff Act to raise US tariffs on more than 20,000 imported goods to record levels, triggering retaliatory tariffs by US trading partners and a global trade war, which prolonged America's economic recovery from the Great Depression.
Moreover, some US politicians' claim that a yuan appreciation could help to cut US trade deficits with China and create jobs for Americans has already been proven to be a false theory running counter to the facts and trade data over past six years.
Since China began to reform its foreign exchange rate regime in 2005, the Renminbi has already appreciated more than 20 percent against the greenback, yet the US trade deficit with China is still going up.
Meanwhile, despite yuan's rising value, the US jobless rate remained excruciatingly high.
The yuan bill's sponsors claim that it would help bring back outsourced US manufacturing jobs, but it's hard to believe that US-based multinational companies will move these jobs back to America, where labor costs remain one of the highest in the world, simply because China further appreciates its currency value.
So it is no surprise that many US business organizations such as the Business Roundtable have been consistently lobbying against such a bill. The Obama administration has also warned the Senate's move could lead to a destructive trade fight.
It's normal that China and the United States, like any two other countries in the world, have trade disputes, especially in an ever-globalized world. But the point is to stay rational and conscientious and hold negotiations whenever such friction arises, and avoid unilateral action such as pushing the yuan bill that would do no good to anyone.