Sept. 9—Fed up with inaction by the Bush administration, a coalition of 20 industrial, agricultural and service organizations and unions filed a petition with the U.S. Trade Representative that would impose trade sanctions against China, the United States’ largest trading partner by far, unless that country revalues its currency.
Within hours, however, the Bush administration rejected the petition.
China keeps the exchange rate of its currency artificially low, the petition says, giving that country an unfair trade advantage over the United States. China underprices its exports to the United States by 40 percent and creates a massive trade deficit that contributes to the loss of millions of good U.S. manufacturing jobs, according to the petition filed Sept. 9 with the U.S. Trade Representative by the China Currency Coalition (CCC), which includes the AFL-CIO and the Industrial Union Council (IUC).
“The Chinese government’s manipulation of its currency gives Chinese-based producers an unfair advantage of approximately 40 percent,” says AFL-CIO Secretary-Treasurer Richard Trumka, chairman of the IUC, made up of 14 industrial unions. “This means that our exports to China are over-priced by 40 percent, while our imports from China are under-priced by the same amount. This is so far from a level playing field, it is almost vertical.”
Within hours after the filing, the Bush administration rejected the petition outright, calling it "reckless." In response, the coalition said the nearly instant rejection of the 200-page petition raises "questions as to whether it was even read by administration officials. This is undoubtedly the fastest rejection of such a petition in history. We also take issue with the characterization by the government that the recommended action would be 'reckless,' in that we are simply requesting that the administrative follow W[orld] T[rade] O[rganization] rules and procedures in seeking corrective action by China."
China’s Exchange Rate Policy Violates U.S. Trade Law
The petition was filed under Section 301 of the Trade Act of 1974. The act allows the government to take action against countries that engage in unfair trade practices against the United States. The petition charges China’s exchange rate policy violates both U.S. trade laws and rules of the World Trade Organization, which China joined in 2001.
The Bush administration and the International Monetary Fund have both called on China to revalue its currency, but the Chinese have refused.
“We must stay on the offensive against Chinese currency manipulation and strike on all fronts until this unfair trade practice has been alleviated,” says Sen. Lindsey Graham (R-S.C.) in a statement read by a staff member at a Sept. 9 press conference in Washington, D.C. Graham and Sen. Charles Schumer (D-N.Y.) have introduced legislation that would impose stiff trade penalties against China if it does not revalue its currency within 180 days.
The petition says China undervalues its currency—the yuan—rather than letting the international financial markets set the exchange rate, as do virtually all the other nations. China’s rate of 8.28 yuan per dollar has been in effect since 1994, but with China’s rapid economic growth, its currency would be much more valuable in the global market if the price was allowed to fluctuate.
U.S. Trade Deficit with China on Record Pace
While cheap imports bearing the “Made in China” label flood the U.S. market, China’s low exchange rate stifles exports to that country. As a result, the U.S. trade deficit with China has skyrocketed, reaching $125 billion in 2003—the largest with any country. The U.S. Commerce Department reports the 2004 overall trade deficit is on pace to reach a record-breaking $575 billion in 2004, and nearly one-fourth of that deficit is due to trade with China.
The U.S. trade deficit with China is growing by more than 20 percent a year, Trumka says, and U.S. consumers buy more than $5 worth of goods from China for every $1 the nation sells to China. Sixty-five percent of Chinese exports to the United States displace American products and jobs, he says.
The United States now imports more than half a trillion dollars worth of goods and services more than the nation produces, undercutting domestic manufacturing and services and increasing U.S. debt with the rest of the world. The enormous trade deficit is a s key factor contributing to the loss of nearly 2.7 million manufacturing jobs since President George W. Bush took office in 2001.
U.S. Jobs Hemorrhage as Bush Administration Stands By
This is the second Section 301 petition filed by the AFL-CIO and IUC. The White House in April rejected the first petition, which found China’s widespread and persistent violations of workers’ rights give producers in China an unfair trade advantage that has cost more than 727,000 U.S. jobs. The petition called on the Bush administration to take immediate action to impose trade remedies against China and negotiate a binding agreement to reduce the trade remedies if China enforces workers’ rights.
U.S. Trade Representative Robert Zoellick dismissed the workers’ rights petition, saying the Bush administration would address the labor, currency and other concerns through “leveraged engagement.”
Saying the United States has taken a passive approach toward China, Rep. Sander Levin (D-Mich.) says, “The impact of being passive is seen in the trade deficit and the effect on businesses and the lives of working people. I urge the administration to take another look [at the China currency petition].”
In the four months since Zoellick’s statement, “the jobs continue to hemorrhage. Workers in China can still be jailed for trying to form an independent union. Workplace health and safety violations occur daily, as do minimum wage and maximum hour violations,” says Trumka.
“It is time for talk to turn into action…the truth is time is running out for too many workers and too many industries,” he says.
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