Currency Bill Passes Over Retail’s Objections
A majority of Democrats and Republicans serving in the House
of Representatives voted yesterday to give the government the option of levying
tariffs on countries, specifically China, that undervalue their currencies
as a means to gain a competitive trade advantage. H.R. 2378, also known as
the Currency Exchange Rate Oversight Reform Act, passed the House by a vote
of 348 to 79.
Congressional leaders, according to a Wall Street Journal report,
have been lobbying for action against China for at least 10 years. Earlier
this year, Treasury Secretary Timothy Geithner warned the Chinese of potential
congressional action in an effort to get them to raise the value of the yuan.
organizations representing retailers expressed an understanding that imbalances
exist, none supported the measure fearing that its passage would violate rules
of the World Trade Organization (WTO), invite retaliation against goods produced
in the U.S. and fail to persuade China to raise the yuan to a fair valuation
Steve Pfister, senior vice president for government relations at the
National Retail Federation, said WTO rules do not include currency exchange
practices as a consideration in duty cases. There is also the question of the
true value of the yuan, which remains a point of disagreement among economists
and banking organizations.
"It makes little sense to give China a legitimate reason to retaliate against
U.S. exports or an excuse to hassle U.S. businesses with no prospect that this
legislation would be effective," Mr. Pfister said in a statement.
"Lost in much of the debate on currency is the fact that China is one
of the largest and fastest growing markets for American exports. Given our
near stagnant economic growth, it makes no sense to provoke tension and erect
trade barriers that could jeopardize thousands of American jobs and undermine
goal of doubling U.S. exports within five years," said Stephanie Lester,
vice president for international trade at the Retail Industry Leaders Association.
The Obama Administration, according to the Journal, didn’t endorse
the bill and chose not to work with legislators on its language to avoid being
seen as supportive of the measure in any way.
The bill now heads to the Senate
where it will likely remain until a new Congress convenes next year.
Discussion Questions: On balance, do you see the Currency Exchange Rate Oversight
Reform Act as positive or negative for America’s economic interests? What
effect do you think it will have on the retail industry and related businesses?
[Editor’s Note] Dow Jones Newswires reported that China’s yuan weakened for the first time in three weeks following the passage of H.R. 2378. According to analysts who spoke with the news service, “Beijing may allow further yuan gains against the dollar in the near term because political pressure from the U.S. will likely continue to build until the mid-term elections in November.”
- House Lashes Out at China – The Wall Street Journal
- NRF Urges House to Reject China Currency Bill – National Retail Federation
to Congress: Tread Carefully on Currency, Escalating Trade Tensions Will
– Retail Industry Leaders Association
- China Yuan Falls For 1st Time In 3 Weeks On US Bill – Dow Jones Newswires/The Wall Street Journal