Chinese currency peg as unfair trade practice?
It is clear that American lawmakers are frustrated with the growing trade imbalance, and many feel the Chinese currency peg is to blame. Accordingly, lawmakers have requested the peg be officially labeled an unfair trade practice, under US trade law. The Bush administration has 45 days to respond to the petition. If it votes affirmatively, the US could rightfully impose trade sanctions or import tariffs on Chinese imports. However, this seems unlikely, as the Bush administration has previously rejected two similar petitions. It seems the administration is pursuing more diplomatic means in trying to coerce China into undoing the peg. However, congressmen have warned that another rejection could force them to use legislation to put pressure on China. Reuters reports:
U.S. manufacturers blame China's long-held policy of tying its currency to the dollar for much of the U.S. trade deficit with China, which hit a record $162 billion last year. They argue the currency peg makes U.S. imports more expensive and Chinese exports cheaper, giving Chinese companies an unfair price advantage of 25 percent to 40 percent.
