Friday, January 1, 2010

Let the Trade Wars Begin

From the FT:

The US House of Representatives passed legislation that would punish China for undervaluing its currency and harming the competitiveness of US manufacturers and exporters, in a move that could heighten trade tensions between the two countries.

China quickly attacked the legislation on Thursday as contrary to WTO rules and “a new move of the US’ rising trade protectionism.” In a statement distributed through state media, a spokesman for the Ministry of Commerce said China “has never undervalued the yuan exchange rate to gain a competitive edge.”

Although the bill’s fate remains unclear, since it still needs to move through the Senate and be approved by Barack Obama, US president, its bipartisan passage in the House by a wide 348-79 margin reflects growing frustration with China’s economic policies.

“If China wants a strong trading relationship with the United States, it must play by the rules,” Nancy Pelosi, Democratic speaker of House, said ahead of the vote on Wednesday.

Some of the rhetoric was even stronger. “They cheat to steal our jobs,” said Mike Rogers, a Republican from Michigan, while Dana Rohrabacher, a Republican from California, attacked China’s “clique of gangsters” that was doing “great damage to the people of the United States of America”. Most Republicans supported the legislation, as did almost all Democrats.