A U.S. Congressional committee has voted out a bill that would subject China to retaliatory trade sanctions on the basis that Beijing keeps the yuan undervalued against the U.S. dollar to give its exports an unfair advantage. The full House will vote on the bill next week. It would still have to be approved in the Senate and survive a Presidential veto to become law. The last two hurdles are much higher than the first. Even if it clears all the American legislative hurdles, imposing countervailing duties skirts World Trade Organisation’s rules closely enough for China to be likely to launch a challenge.
Sander Levin, chairman of the House Ways and Means committee, draws a straight line between China’s currency policy and American jobs, saying the yuan “has a major impact on American workers and therefore American jobs. That’s what this is really all about.”
That is what the politics is all about. What is less clear is that revaluing the Chinese currency would create more jobs in he U.S. in any significant number. Few economists would argue that it would unless the revaluation is of a scale that would cause a whole new slate of economic problems of its own. And even within the narrow dimension of currencies, America’s international competitiveness turns on more than a single exchange rate now that China sits at the heart of a web of Asian manufacturing.
Chinese commentators have been uniform in pushing the line that the US. is blaming China for its poor economic performance instead of trying to put its own house in order. With American politicians deep into a contentious midterms election season, that message is likely to fall on deaf ears.