A group of U.S. senators, on the eve of Chinese President Hu Jintao’s arrival in the United States, said the time has come for U.S. congressional action on China’s currency policies.
Democratic Senator Charles Schumer said Beijing’s currency practices give Chinese companies an unfair trade advantage and have acted like “a boot on the throat” of U.S. economic recovery.
Hu arrives in Washington on Tuesday for a state visit with President Barack Obama and also is expected to meet with senior members of Congress. Schumer and many other lawmakers have complained for year about China’s currency practices.
Policy actions like the U.S. House’s Currency Reform for Fair Trade Act – even just talk about it like we’re hearing today – are a huge gamble at a very fragile time for America’s economy. There is a reason why a wide range of business groups (even including U.S. farmers) urged the House not to pass the bill: because it could do more harm than good.
History teaches us that policies aimed at protecting domestic industries by limiting imports often cause far more harm than they designed to counteract. That is in part because of retaliation from trading partners; last year when Washington imposed a 35 percent tariff on tire imports, China retaliated with tariffs on American chicken (which it raised again last month, from 31.4 percent to 105.4 percent).
It is often said that trade is not a zero-sum game, but that’s not really true. Trade need not be zero-sum, but politics can make it so.
FutureofUSChinaTrade.com
http://futureofuschinatrade.com/article/us-china-trade-consequences-of-protectionism