Will US Pressure Force China to Modify Its Currency?
The apparel and textile industries are lining up on both sides of the fight to pressure China to revalue its currency.
Recently, the National Council of Textile Organizations and other organizations and businesses signed a petition asking the U.S. Senate to pass legislation imposing countervailing duties on certain Chinese-made goods if China doesn’t allow its currency to float to its real value. Many believe the Chinese yuan is undervalued by at least 25 percent to 30 percent, making Chinese goods cheaper in the United States but raising the price of U.S. exports to China. The United States has an annual trade deficit with China of more than $250 billion.
On Oct. 3, the U.S. Senate voted 79–19 to bring the Currency Exchange-Rate Oversight Act of 2011 up for debate. The bill is expected to pass the Senate, but its future in the House of Representatives is less clear.
The bill clarifies the U.S. Department of Commerce’s responsibility to investigate alleged currency subsidies and determine the amount of the undervaluation. It would then recommend action to be taken to correct this imbalance.
The petition also was signed by textile businesses such as Denim North America, Swift Spinning Inc., Consolidated Fibers Inc., Buhler Quality Yarns Corp., Frontier Spinning Mills Inc., Liberty Denim LLC, National Spinning Co. Inc., Parkdale Mills Inc., Unifi Inc., Tuscarora Yarns and Mount Vernon Mills Inc.
Opposing the legislation is the American Apparel & Footwear Association, whose members include major apparel makers such as Liz Claiborne Inc., VF Corp., Jones New York, Perry Ellis International Inc. and the Kellwood Co.
The AAFA supports pressure on China to revalue its currency but believes pressure should be worldwide.
“Our organization supports strong, coordinated and enhanced multilateral pressure through international organizations such as the G-20 [a group of rich and developing countries] and APEC [Asia-Pacific Economic Cooperation] to promote China’s adoption of market-determined currency and exchange-rate policies,” the organization wrote in a September letter to Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell.
The AAFA and other groups such as the United States Association of Importers of Textiles and Apparel believe that countervailing duties by the United States won’t influence China to modify its exchange-rate policy and could lead to a trade war. “It would likely have the opposite effect and result in retaliation against U.S. exports into China, currently the fastest-growing market for U.S. exports. Tariff legislation would not get us closer to the goal of a market-driven exchange rate. Instead, it would highlight U.S. unilateral action, thereby shifting the focus of the international community away from the core issue of China’s currency,” the letter said.
The Obama administration has been pushing to expand U.S. exports to create more jobs at home. One of the growth areas for apparel and textiles has been exports to emerging economies in Asia and Latin America. The U.S. Department of Commerce reported recently that apparel and textile exports were up 16.6 percent for the year ending July 31, 2011, compared with the same period in 2010.—Deborah Belgum
