US lawmakers back Currency Reform for Fair Trade

Face off!

A few months back, I was invited by a friend to watch their self-produced parody of the movie Apocalypto. It was just a school project that used the plot of the movie that I have mentioned. In one of the scenes, a guy yelled and said “God made the earth…and everything else is made in China!” It really made me laugh.

But it seems that scenario is about to change. Some US Republicans and Democrats from both senate and congress backed the Currency Reform for Fair Trade Act of 2009 which aims to use US anti-dumping and countervailing duties to strike back at prolonged currency manipulation made particularly by China, Japan and others. Although the legislation named no specific country, the message seems to be clear.

The bill if inked into law, "would give trade remedies to American businesses and workers. It would send a clear message to China — and any other country considering currency manipulation — that this practice is unacceptable," said Republican Senator Jim Bunning.

For sometime now, the US government is accusing China for manipulating the yuan or renminbi. It is said that China’s Yuan is undervalued by as much as 40 percent in comparison to the U.S. dollar. Currency intervention is the action of a government, central bank, or speculator that increases or reduces the value of a particular currency against another currency. Most US manufacturing companies are against this insisting that Americans are losing jobs because of the unfair practice.

On the other hand, China denied allegations that it has manipulated its currency. Instead, the Chinese government insisted that the new bill will only encourage protectionism. "The Chinese government has never engaged in so-called manipulation of currency exchange rates to obtain international trade benefits," said Chinese Foreign Ministry spokesman Ma Zhaoxu.

The bill may hamper the Beijing trip of U.S. Treasury Secretary Timothy Geithner next month to meet with top Chinese officials.

Here are some facts provided by the Alliance for American Manufacturing as to why they are happy that the government is taking some action against unfair trade.

• The U.S has lost more than 4 million manufacturing jobs since 2000.
• A recent EPI study found that the U.S. has lost more than 2.3 million jobs since 2001 just as a result of the U.S. trade deficit with China.
• More than 40,000 factories have closed nationwide in the past 10 years.
• Manufacturing accounts for $1.6 trillion of U.S. GDP (12%), and accounts for nearly three-fourths of the nation’s industrial research and development.
• A continuing loss of U.S. manufacturing means more unsafe imports and a greater dependence on foreign factories to produce both our everyday consumer goods and military hardware.

But at this point in the recession, will this motion gain good results as foreseen or a trade gap between to economic giants?

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