China Currency Bill Garners Mixed Reaction From Industry Groups

Steel associations and labor groups support measure, but others say bill will hurt U.S. exports.

The passage of a House bill that would permit tariffs on Chinese goods was praised by many manufacturing groups as an effective means to what they say are China's unfair trade practices. But a group that represents approximately 220 major U.S. manufacturers says the bill won't create U.S. jobs and will encourage China to pursue retaliatory actions against U.S. exports.

The bill would give U.S. manufacturers a tool to address China's trade advantage that is bolstered by currency that is undervalued by as much as 40%, says American Iron and Steel Institute President and CEO Thomas Gibson.

"I commend the House for taking this bold action today to hold China accountable for its protectionist economic policies that violate World Trade Organization rules and continue to harm American manufacturers," Gibson said Sept. 29 after passage of the Currency Reform for Fair Trade Act.

AISI sent a letter Sept. 27 on behalf of the U.S. steel industry calling for passage of the bill. The United Steelworkers, Committee on Pipe and Tube Imports, Specialty Steel Industry of North America and the Steel Manufacturers Association also signed the letter.

But prior to the vote the US-China Business Council also sent a letter stating that the bill will negatively impact manufacturing in the United States.

"USCBC believes that China's exchange rate should better reflect market influences from trade flows and supports effective actions to get to that goal," said USCBC President John Frisbie in a letter dated Sept. 24. "Counterproductive tariff legislation is just the wrong way to get to that goal and will do more harm than good. The Obama administration's multilateral and bilateral approach should be supported and continued, not undermined."

If China's exchange rate increases, imports from other low-cost countries, such as Vietnam and Mexico, will rise instead of encouraging more domestic production, Frisbie contends.

"It's hard to see how it makes good sense to 'send a message to China' by punishing ourselves with taxes on American households and lost export opportunities for manufacturers and farmers if China retaliates," he said. "We need to come up with an approach that gets the job done, not pursue divisive tariffs that hurt a broad group of Americans - households, manufacturing exporters and farmers - while protecting the narrow interests that support this bill."

USCBC represents more than 200 large manufacturers, including Caterpillar Inc., The Timken Co. and Harley-Davidson Inc. Timken CEO James Griffith has been outspoken in the past about the perils of protectionism. But Timken spokesperson Lorrie Paul Crum said the company has not taken an official stance on the House bill.

USCBC says it supports continuation of the Obama administration's bilateral and multilateral talks with China rather than a "heavy-handed unilateral" approach.

The United States Business and Industry Council issued a statement refuting such arguments, saying both the Bush and Obama administrations have already engaged with bilateral talks and multilateral efforts with the International Monetary Fund and G-20 to change China's currency policies. USBIC also noted that during seven years of diplomacy the U.S. trade deficit with China has reached $1.6 trillion, and China's official reserves have risen by $2.2 trillion.

The bill passed by a 348-79 margin. The Senate has signaled it will take up a companion bill after the elections, but the legislation's fate is unclear and Obama has not formally taken a position on whether he supports it, Agence France-Presse news service reports.

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