China allegedly aligns its currency to the US dollar at below market rate

China allegedly aligns its currency to the US dollar at below market rate

China currency legislation being considered by Congress has divided textile makers and apparel importers over its ability to create jobs and economic growth.

The bill, which is being voted on today (29 September) by the House of Representatives, would give US companies the ability to defend themselves against Chinese currency manipulation by placing countervailing duties equal to the Chinese manipulation on imports of certain goods from China.

The Currency Reform for Fair Trade Act is described as "an essential step" towards bringing textile and manufacturing jobs back to the US by The National Council of Textile Organizations (NCTO). But the American Apparel & Footwear Association (AAFA) believes it is "short-sighted" and would only serve to ignite a trade war between the United States and China.

"The bottom line is that this bill would not create any jobs here in the United States and does nothing to force China to revalue its currency," explains AAFA president and CEO Kevin M Burke. 

"If this bill moves forward, the only thing it will accomplish is to ignite a trade war between the United States and China at the cost of American jobs, including jobs in the US apparel and footwear industry."

But NCTO president Cass Johnson believes that if China were to allow its currency to rise to market levels, "the textile industry in the United States would add thousands of additional new jobs and build or re-open dozens of plants."

He adds: "This legislation sends a clear message to China that it must abandon its 'beggar thy neighbour' currency practices. If China fails to rebalance its currency, this legislation provides US manufacturers and US workers the necessary tools to defend themselves against China's predatory practices."

The bill would use US countervailing duty (CVD) and anti-dumping law to hit back at prolonged currency manipulation. It is aimed at countries like China, which allegedly aligns its currency to the US dollar at a below market rate so that its goods are less expensive on international markets.

If the measure is passed today it will still need to gain Senate approval and be signed into law by President Obama.