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Manufacturers prepare case against china Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000080&sid=aV_88sD20RN4&refer=asiahttp://quote.bloomberg.com/apps/news?pid=10000080&sid=aV_88sD20RN4&refer=asia
U.S. Manufacturers Prepare Trade Case Against China (Update2)
July 31 (Bloomberg) -- A coalition of U.S. steel, textile, and other manufacturers is preparing a trade complaint against China's currency policy, trying to make the Bush administration prod the country to allow the yuan to strengthen.
The manufacturers say the yuan, pegged at 8.2770 to the dollar for eight years, is as much as 40 percent undervalued, giving Chinese companies an unfair edge and violating both World Trade Organization and International Monetary Fund rules.
``We have to somehow prompt our government to enforce the agreements we're a party to,'' said Paul Freedenberg, director of government relations at the Association for Manufacturing Technology, which represents 360 machine-tool makers. The case ``would stir up political interest as much as anything else.''
The case is backed by trade groups that represent 3M Co., General Electric Co., The Gillette Co. and hundreds of other companies. It's being prepared against the backdrop of growing political pressure on the Bush administration to confront China, which has seen an explosion of exports to the U.S. since it joined the WTO in December 2001.
The U.S. trade deficit with China rose to a record $103 billion last year and may top that this year. U.S. manufacturers have lost 2.6 million jobs since 2000 and say they are in their worst recession in two decades, in large part because of stiffer competition from Asia. June was the 35th straight month of declining factory jobs, the longest streak since World War II.
Because of the peg, the yuan hasn't appreciated against the dollar while the Chinese economy has grown at an average annual rate of 8.6 percent over the past decade and attracted $308 billion in foreign investment since the peg began.
Trade Complaint
China and Japan ``can't devalue themselves to prosperity,'' U.S. Treasury Secretary John Snow told Bloomberg News in a television interview yesterday. ``We're encouraged by the reports out of China that they are looking at employing a more flexible currency regime,'' Snow told a Senate panel today.
For the Bush administration, taking on China is a delicate diplomatic issue. The U.S. has been relying on China to help ease tension with North Korea and has been encouraging an increase in trade and investment with the world's most-populous nation.
More than 80 trade associations have already banded together to form the Coalition for a Sound Dollar, which watches what it calls currency manipulation by China, Japan, South Korea and Taiwan. Last month the group issued a report claiming those four countries had spent $1 trillion to keep their currencies artificially low and their exports cheap.
Splitting the Cost
The coalition is now canvassing its members to see which ones are ready to contribute to the estimated $200,000 cost of filing the case with the U.S. Trade Representative's office.
Once the complaint is filed, as early as next month, it would be the first time a U.S. regulation called Section 301 is used to challenge a country's weak currency.
Past 301 cases have focused on issues such as Ukrainian copyright piracy and South Korean limits on auto imports. The formal complaint may prompt the administration to file a formal case at the WTO or impose retaliatory tariffs.
``It's a way to bring some pressure to bear on the administration,'' said Thomas Danjczek, president of the Steel Manufacturers Association, which represents Nucor Corp., the largest U.S. maker of steel from scrap, and other mini-mills.
Complaint Procedure
Nucor President Dan DiMicco has called the undervalued yuan the most pressing issue facing his industry and advocated a new international agreement to get the yuan revalued.
In the letter that went out to its members, the manufacturers coalition asked whether the companies wanted to challenge just China or China along with Japan, South Korea and Taiwan, said Frank Vargo, the vice president of the National Association of Manufacturers and leader of the currency group.
The complaint to the U.S. trade office is meant to force that agency to formally evaluate China's currency practices and decide whether the country is violating WTO and IMF rules by keeping the yuan undervalued.
If the trade office determines any violations, it can first press China to change its practices and then may file a WTO case, according to the trade office.
``In most cases, negotiations are enough to convince the country to comply with its international obligations,'' the U.S. trade office said in a description of Section 301 on its Web site. If negotiations fail, the U.S. may raise ``import duties on a foreign country's products to respond to the trade damage.''
Political Pressure
Congressional representatives have also taken up the cause.
``It's time to put some muscle into our trade relationship with China,'' Senator Charles Schumer, a New York Democrat, said in a statement. Schumer and 11 other members of Congress sent a letter to President George W. Bush today urging more pressure on China to float or revalue the yuan.
``We're going to lose not just jobs; my guess is you're going to lose the free-trade consensus very, very rapidly'' unless the trade deficit with China falls, Schumer told Snow at a hearing today.
Some industries aren't waiting around for the currency case. Just last week a coalition of U.S. textile and apparel companies together appealed to the U.S. Commerce Department to cap imports of brassieres, knit shirts and other apparel from China, alleging that surging imports from that nation threaten the survival of their industry.
Chinese sales of textiles to the U.S. rose 63 percent to $3.15 billion in 2002 and have continued to rise this year.
Yesterday, Pillowtex Corp., the maker of Royal Velvet and Fieldcrest sheets, towels and pillows, closed 16 plants and dismissed 6,450 workers, the largest firing in U.S. textile history, as the company seeks to liquidate its assets in bankruptcy.
``The orderly development of trade in the U.S. textile and apparel market is not merely threatened, it is under an unprecedented attack from a flood of illegally subsidized Chinese imports,'' said Allen Gant, chief executive officer of Glen Raven Inc., at a press conference outside of Congress last week. The closely held company is a Glen Raven, North Carolina-based, maker of fabrics, including awnings, sails, cushion covers and curtains.
Last Updated: July 31, 2003 16:34 EDT
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