Senator: Senate likely to pass China tariff bill

[Ron Burgundy]

Reuters - The Senate is likely to pass a bill aimed at forcing China to change its currency policies by threatening a 27.5 percent tariff on its exports to the United States, a top Republican senator said on Thursday.

WASHINGTON (Reuters) - The Senate is likely to pass a bill aimed at forcing China to change its currency policies by threatening a 27.5 percent tariff on its exports to the United States, a top Republican senator said on Thursday.

"I would expect it to pass and I'm sorry for that," said
Senate Finance Committee Chairman Charles Grassley of Iowa.

Senate leaders have promised Sens. Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, a vote next week on their bill threatening China with punitive tariffs.

Grassley, whose committee has jurisdiction over trade legislation, said he expected the vote to occur even though it could herald a return to the Smoot-Hawley tariff policies of the 1930s that are blamed by many economists for starting or at least protracting the Great Depression.

The House of Representatives would also have to pass the bill, and
President George W. Bush would have to sign it for it to become law.

There is currently no similar bill in the House and the Bush administration strongly opposes the legislation.

However, many business groups and trade experts warn that even a Senate vote in favor of the bill could hurt trade relations with China.

"Senate passage ... alone will have negative repercussions for U.S. farmers, manufacturers, service providers and others, while undercutting, rather than promoting, the objectives it seeks to achieve," the Emergency Committee for American Trade, which is comprised of leading U.S. exporters and importers, said in a letter to all 100 members of the Senate.

U.S. manufacturers say China's currency is undervalued by 15 percent to 40 percent against the U.S. dollar, giving Chinese competitors an unfair advantage.

The Graham-Schumer bill directs the White House to impose a 27.5 percent tariff on goods from China if Beijing does not significantly raise the value of its currency within six months. That punishment could be delayed for 12 more months if China has begun implementing a plan to revalue its currency.

Grassley said he expected the legislation to pass because China has not followed through on longtime promises to move to a more flexible exchange rate policy.

U.S. Treasury Secretary Henry Paulson is currently in Beijing and announced on Wednesday the creation of a new high-level forum with China to work on trade and economic issues, such as Beijing's currency policy.

The yuan has gained in value during Paulson's visit to China, but manufacturers and many lawmakers are frustrated it still has risen only slightly since Beijing freed it from a longtime peg against the dollar in July 2005.

[motivez]

What does the economics crew think about this?

[Scrum]

I'm no expert, but won't this make trading with us less attractive?

[Publius]

hina has been artificially suppressing the yuan's worth for well over a decade now, and the result is the massive trade deficit we have with the Chinese... But tariffs are the most idiotic thing we could do, and will hurt the American consumer more than anything.

This is stupid.

[Publius]

Originally Posted by Scrumtralecent

I'm no expert, but won't this make trading with us less attractive?

Basically.

[motivez]

So what's the solution to get them to stop doing that with their currency?

[Ardentfrost]

Originally Posted by motivez

So what's the solution to get them to stop doing that with their currency?

Well, tariffs and/or embargoes are certainly not the answer and only creates strife and poor foreign relations (eg. Cuba).

One of the things that people love to bring up about free trade (unmitigated and capitalist) is that socialist and communist countries can subsidize certain industries which make them more attractive globally. But that only creates discourse in the country after a certain point, and they may gain in one or a few industries, but a capitalist nation is better able to produce supply in many areas, and change those areas as world demand changes more quickly than in a country that uses subsidization for unnatural stimulation and prices.

By keeping their currency undervalued, they are trying to subsidize the entire country at once, but that still plunders the citizens (so to speak) and their worth. China's authoritarian practices can only maintain labor stimulation for so long. It'll wane and they'll have to change what we're trying to force on them.

[6SpeedTA95]

Originally Posted by Publius

hina has been artificially suppressing the yuan's worth for well over a decade now, and the result is the massive trade deficit we have with the Chinese... But tariffs are the most idiotic thing we could do, and will hurt the American consumer more than anything.

This is stupid.

Tariff's dont work, this sets a horrible precedent :hsd;