Schumer Details New Plan To Get Tough On China To Help Struggling Businesses In The Southern Tier
MT Picture Display has already had to lay off hundreds because of competition from cheap Chinese imports; Chemung County has lost over 800 manufacturing jobs over the last two yearsSchumer'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 troubled MT Picture Display factory in Horseheads, US Senator Charles E. Schumer today said that the U.S. must hold onto manufacturing profits and jobs by imposing an acrosstheboard tariff on Chinese imports. Schumer detailed his new bipartisan effort to get the Chinese government to stop manipulating the value of its currency, 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 an alarming rate. We can't afford to let any more time go by without taking concrete and strong action."
MT Picture Display, based in Horseheads, employed roughly 1,100 people manufacturing cathode ray tubes for color picture televisions. But in early November, the company announced it would downsize in an effort to restructure in the face of increased imports from China, laying off hundreds.
Much of China's success in selling lowpriced goods has been attributed to the undervaluation of its currency, the yuan, which has played a major role in the loss of 2.6 million US manufacturing jobs since March 2001, including nearly 100,000 in New York, and over 8,700 in the Southern Tier alone (including 800 in Chemung County; 2000 in Steuben County; and 100 in Schuyler County). 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 marketbased 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, Chinas economy has grown dramatically, averaging over 8% per year. If Chinas 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 Chinas imports from the U.S. have increased to $19 billion from $13 billion in 1997. The result is that Chinas 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 toughlove 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 yuans 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. Chinas 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.
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