FOR IMMEDIATE RELEASE: March 22, 2004
Schumer: Highest Rochester Jobless Rate In 20 Years Underscores Need To Get Tough On China
Precision Grinding & Manufacturing has had to lay off over 1/3 of its employees since last year because of competition from cheap Chinese imports; Rochester area has lost an estimated 5,000 manufacturing jobs since December alone
Schumer's tough approach tells Chinese government to stop manipulating its currency or risk being slapped with large tariffs on its exports
Standing with workers at the struggling Precision Grinding & Manufacturing factory in Rochester, US Senator Charles E. Schumer today detailed his new plan to get tough with China and keep manufacturing jobs in the Rochester/Finger Lakes area. With Rochester facing its highest unemployment rate of the last twenty years, Schumer detailed his bipartisan effort to get the Chinese government to stop manipulating the value of its currency (the yuan), a practice that gives the Chinese an unfair edge in making and exporting products.
"It's time to put some muscle into our trade relationship with China," Schumer said. "For too long, the Chinese government has been playing games with the value of its currency in order to get a competitive edge. As a result, US manufacturing jobs and profits are disappearing at a mind-boggling rate. Unemployment here is higher than its been in twenty years and the bottom line is clear: We can't afford to let any more time go by without taking concrete and strong action."
Precision Grinding & Manufacturing, based in Rochester, employed roughly 170 people but has had to cut that number down to 105 over the last year alone. The company, which has lost millions in sales since 2002 due to Chinese imports, makes metal assemblies and components for Eastman Kodak, Xerox copier products, and medical instruments for Johnson & Johnson. The company estimates that it has lost millions over the last two years because of cheap Chinese competition.
Much of China's success in selling low-priced goods has been attributed to the undervaluation of its currency, the yuan, which has played a major role in the loss of 2.8 million US manufacturing jobs since 2001, including more than 130,000 in New York -- and 5,000 in Rochester since just December of 2003. The undervaluation of the yuan makes China's exports relatively less expensive for foreigners, and makes foreign products relatively more expensive for Chinese consumers and discourages imports. The effective result is a significant subsidization of China's exports and a virtual tariff on foreign imports.
Schumer's plan would apply a "symmetrical" tariff of 27.5% in line with China's currency undervaluation that would be applied across the board to products from China. It would allow the President to remove sanctions once he certifies that China has moved to a market-based currency. The tariffs would kick in after a grace period of 180 days to ensure that Treasury officials have adequate time to work with the Chinese government to institute reforms. The yuan -- sometimes known as renminbi -- has been tightly pegged to the U.S. dollar since 1994 (approximately 8.28 yuan to the dollar). During that period of time, China’s economy has grown dramatically, averaging over 8% per year. If China’s currency freely floated in the market, as is the case with virtually all major world currencies, it would have appreciated substantially reflecting China's underlying economic strength. However, it has remained at the same pegged value, and the result is that many economists estimate that the yuan is now undervalued by between 15 and 40 percent.
As a result, China has enjoyed enormous export success – exports grew 22% in 2002 to $125 billion, they were $62 billion in 1997 – and a much more modest increase in imports – China’s imports from the U.S. have increased to $19 billion from $13 billion in 1997. The result is that China’s trade surpluses are at record highs, and its economic growth continues unabated, even in the aftermath of the SARS health crisis.
"The Chinese want to have it both ways: On one hand they want free trade and want membership in the WTO and other international trade organizations. But on the other hand, they don't want to play by the rules of those organizations. The Chinese actions endanger American and world commitment to free trade and weaken the support in Congress for free trade," Schumer said. "This legislation is a tough-love effort to get the Chinese to stop playing games with their currency in order to level the playing field for American companies trying to compete with goods and service coming from China."
As the United States largest export industry, manufacturing has felt the impact of the yuan’s undervaluation most dramatically. Since the start of the recession in March 2001, the manufacturing sector has lost millions of jobs, accounting for nearly 90 percent of the total U.S. jobs lost, yet manufacturing employment is less than 14 percent of the U.S. workforce.
In order to hold the value of the yuan within its tight and artificial trading band, the Chinese government has intervened in its foreign exchange markets. China's increase in reserves over the past twelve months exceeded that of any other country in the world. However, the practice of “currency manipulation” to gain a trade or competitive advantage violates World Trade Organization and International Monetary Fund agreements, of which China is now party. China’s emergence as a manufacturing powerhouse at the expense of the United States raises significant economic security concerns and the question of whether a country that loses its ability to produce tangible products will long remain an economic power.