The 2011/11/03 at 05:47
The US Senate has voted in favour of a law allowing the United States to apply taxes on Chinese imports. The bill proposed by a Democrat senator foresees adding extra taxes on goods imported from countries whose currencies are “poorly aligned”. This project obviously aims at giving the USA a means to fight back against countries whose currencies are artificially undervalued, namely China. Unsurprisingly, Beijing immediately expressed hostility to the text that is a “serious breach of World Trade Organisation (WTO) rules”, according to the Chinese Minister of Foreign Affairs.
Meanwhile, the official Chinese press agency Xinhua estimates that if this law is voted in by the US Congress and adopted by President Barack Obama, “a trade war” risks breaking out. Beijing could for example strengthen regulatory restrictions weighing down on US companies set up in China. The Central Bank of China has also criticised the US initiative.
According to the institution, “making groundless accusations about the renminbi exchange rate will not solve the United States’ lack of savings, trade deficit or high unemployment rate.” On the other hand, the Central Bank states that the move “could seriously disrupt the exchange rate reforms that China is undertaking”. Beijing recalled that since June 2010, its currency has appreciated by 7 % compared with the dollar. And while its trade surplus has strongly increased with the USA in the last ten years, it has had a tendency to diminish with the rest of the world. According to the world’s second economy, this decline is a sign that the rate of its currency is on the way to normalisation. But the US law may well urge China to stop this movement towards the renminbi’s appreciation.
All the more as according to commentators, the upwards push of the yuan increasingly penalises Chinese exporter industries with low added value, faced with the tepidness of demand on developed markets. In the USA, while the senators’ proposition has met with approval from many voters, it is very unlikely to get through on the Congress level. Lobbies representing the business community, including the US Chamber, are opposed to it, considering that the bill would risk precipitating the United States into a useless trade war with China.
The Congress’ Republican spokes-man judges the text to be dangerous. Nor has the proposal that may hinder international treaties won the support of Barack Obama. All the same, the US President has shown severity towards the United States’ second trade partner after Canada “China has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States,” declared the President. There is no doubt that this issue will be raised during the G20 organised in Cannes these next two days.