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STRATEGY

Business Groups Rally Against Bush Administration
 

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November 28, 2005--In the wake of President Bush’s recent trip to Asia, a coalition of U.S. business groups is assailing the administration for failing to press China to revalue its currency, which many say unfairly favors Chinese manufacturers and constitutes a violation of China’s free-trade obligations.

More than 40 manufacturing trade groups, including the Steel Manufacturers Association, have formed the China Currency Coalition with the U.S. Business and Industry Council to oppose what they consider China’s illegal manipulation of its currency. The Coalition favors passage of a Congressional bill that would allow U.S. businesses to file suit against China with the World Trade Organization on the grounds of currency manipulation.

“Any casual observer can see that China is manipulating its currency, said Doug Bartlett, co-chairman of the coalition. “We have been extraordinarily lenient in granting them time to make necessary currency reforms.

Bartlett said China’s currency policy is contributing to the U.S. trade deficit with China and costing manufacturing jobs in the U.S.

In an interview with Bloomberg Television on Nov. 17, Treasury Secretary John Snow said that the U.S. should give China more time to prove their commitment to flexible exchange rates.

According to the Commerce Department, the U.S. imported almost $162 billion more from China than China spent on U.S. goods and services in 2004. This exceeds U.S. trade deficits with all other countries, and constitutes almost 25% of the total 2004 U.S. trade deficit with the rest of the world.

Economists and industry groups have argued that China’s policy of pegging its currency to the dollar artificially lowers the price of Chinese goods, giving them an unfair advantage over goods manufactured in the U.S.

Since the beginning of 2003, the dollar has fallen almost 12% against the euro, while it has risen 2.5% in value against China’s currency, the yuan. Economists say China has suppressed the rise in its currency by purchasing, on average, $200 billion per year in Treasury bonds and other U.S. securities.

In July, China loosened its currency policies by appreciating the yuan 2.1% against the dollar, and allowing it to continuing appreciating by up to 0.3% per day against a weighted average of major currencies.

Economists like Peter Morici of the University of Maryland have joined Bartlett and the coalition in its belief that these moves are too small to affect the trade imbalance.

“China’s currency is as much as 40% under-valued compared to the dollar, and I believe it moves further out of alignment each month, said Morici. “A few percentage points won’t change that.

Doug Bartlett serves as chairman of family-owned Bartlett Manufacturing in Cary, Ill., which makes high-end electronic circuitry. Since 2000, Bartlett’s annual revenue has fallen from $22 million to $8 million, and his workforce has shrunk from 250 to 67.

“We’re not competing with Chinese businesses, Bartlett said. “We’re competing with the Chinese treasury, and it would take a superhuman effort to win that battle.

Last updated: Nov 28, 2005




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