Give Me A "V"! Give Me An "E"! Give Me A "T"!
By Pejman Yousefzadeh Posted in Economy — Comments (1) / Email this page » / Leave a comment »
Oh, and what the heck, give me an "O"!
What does that spell?
It has become a Capitol Hill ritual: A few senators, always including the New York Democrat Charles E. Schumer, introduce a bill to punish China if its leaders do not raise the value of the nation's currency. Photos are taken, news releases are issued, but nothing really happens.
This year, the atmosphere on the Hill is markedly different. Powerful senators from both sides of the aisle, Schumer among them, are pushing two bills that threaten retaliatory action if China does not budge. For the first time, the idea is gaining broad support. The bills are moving swiftly through the Senate, and many analysts expect one will pass.
That prospect set off alarms this week within the Bush administration. Led by Treasury Secretary Henry M. Paulson Jr., the administration has prescribed diplomacy in place of strong-arm tactics, cognizant of the tendency of China's leaders to stiffen in the face of outside pressure. The administration yesterday pleaded for patience and raised the specter of a damaging trade war if Congress moves on the bills.
In a letter to Senate Majority Leader Harry M. Reid (D-Nev.), three members of the Bush Cabinet -- the Treasury secretary, Commerce Secretary Carlos M. Gutierrez and U.S. Trade Representative Susan C. Schwab -- urged rejection of the Senate bills, calling them "the wrong approach."
The bills "would substantially weaken the position of the United States in our ongoing efforts to achieve essential economic reforms in China and around the world," the letter said. "At a time when U.S. exports are growing globally, such legislation also exposes the United States to the risk of 'mirror legislation' abroad and could trigger a global cycle of protectionist legislation."
The administration unleashed its admonition as Paulson visited China once again, pursuing his favored course -- high-level talks with Chinese counterparts on a range of trade issues. Paulson has maintained that this Strategic Economic Dialogue remains the best channel for persuading China to allow its currency to float freely and to respect the norms of international trade.
Since the dialogue was launched in December to fanfare in Beijing, however, the main achievements have been minor deals, such as additional airline routes and promises of more talk. Growing numbers of lawmakers from both parties have joined a chorus of aggrieved manufacturers and labor unions, who maintain that China artificially depresses the value of the yuan to keep its goods unfairly cheap on world markets, costing American jobs.
"The current dialogue isn't working," Sen. Charles E. Grassley (R-Iowa) said yesterday in a statement. "China's progress on currency modernization has been glacial."
And one would hope that it remains glacial. Here's why. If President Bush has misplaced his veto pen, someone find it for him quick. This piece of legislation just begs to be sent back to Capitol Hill, desolate, rejected and not made into law.
In Foreign exchange news, we heard of the Chinese diversifying their foreign exchange holdings. A couple of years ago, the G-8 summit encouraged the diversification of foreign currencies away from the USD. The USD fell as a result. While in S Korea I witnessed the Wons appreciation against the USD by about at least 20%(1300W-950 won). When I check out the foreign exchange TICS reports, the foreign buyers dominate the buying of treasuries, so the recent bloomberg report of the American record revenues lately have come at good time in that foreign buyers are not so dominant, and was a very recent report over the last month.
Are we really to expect that American manufacturers can compete with the labor costs of China so that our export # match their exports?
I just know of one company who successfully exports to China and thats a Devos company. I know Chinese officials checked out Devos Nutrilite manufacturing facility so that they could grow their own organic concentrated vitamin and farming operation.