By  on January 24, 2005

NEW YORK — Sen. Charles Schumer said Friday he will introduce legislation, co-sponsored by Sen. Lindsey Graham, that would apply a 27.5 percent tariff to all imports from China, with the aim of lowering the growing trade deficit the U.S. has with that country.
Schumer, New York’s senior Democratic senator, said he plans to introduce the tariff measure in the Senate this week, which “will send a shock that will be heard round the world.” Graham is a Republican senator from South Carolina, a major textile producing state.

Their proposal is an effort to offset the competitive advantage that Chinese exporters get from their country’s fixed exchange rate. The Chinese currency for more than a decade has been pegged at about 8.28 yuan to the dollar, a conversion some economists estimate is undervalued by as much as 40 percent.

“They don’t let their currency float,” Schumer said. “They artificially have it set at a low value.”

Although China enjoys some inherent advantages in the manufacturing arena, such as lower labor costs, he said its fixed exchange rate poses a major hurdle to U.S. competitors by making its exports seem comparatively even cheaper and imports from the U.S. comparatively more expensive.

Schumer said U.S. manufacturing executives have told him “even with [China’s] lower cost of labor, we can compete, but once you add another 25 percent to 40 percent advantage, we’re dead.”

He made his comments outside the Jacob K. Javits Convention Center here, where the Chinabrand 2005 trade show, an event sponsored by China’s Ministry of Commerce, was in its second day.

“I’m troubled by the Chinese government coming here today to flat-out try and steal jobs from New York businesses,” said Schumer, who charged the undervaluation of the yuan has contributed to the loss of 100,000 manufacturing jobs in New York State alone since 2001.

A spokesman for the show disputed Schumer’s assertion that the event would take a toll on U.S. employment.

“What they’re doing is trying to introduce China brands in the U.S. and therefore create jobs, surely, for U.S. distributors,” the spokesman said during a phone interview. “If they took it to the next stage, which was to invest in U.S. companies, surely that in itself would be creating American jobs.”Officials from China’s Ministry of Commerce said the point of the event was to give Chinese manufacturers a chance to sell wares bearing their own brand names in the U.S. market. But on the show floor, many of the 40 or so apparel and textile exhibitors said while they sell garments bearing their own brand name in China, for U.S. customers they focus on contract production for major Western brands.<

China’s fixed exchange rate has become a hot political issue over the past two years, particularly as the U.S. trade deficit with the Asian nation has risen. For the first 11 months of 2004, the U.S. imported $179.18 billion worth of all Chinese goods and exported $31.46 billion worth to China, leaving a $147.71 billion deficit, according to the Census Bureau. In 2000, the year before China joined the World Trade Organization, the bilateral deficit stood at $77.69 billion for the comparable period.

U.S. imports of Chinese textiles and apparel have been growing quickly and rose 25.8 percent to $14.43 billion for the year ended Nov. 30. That growth is expected to pick up this year following the lifting of apparel and textile quotas among the 148 WTO nations.

The Bush administration has urged China to loosen its currency controls. In Beijing earlier this month, outgoing Commerce Secretary Donald L. Evans told a U.S. business group, according to a copy of his prepared remarks, that “the administration has urged China at every opportunity to move as soon as possible to a flexible, market-based exchange rate.”

Schumer said the Bush administration’s efforts amounted to “whack[ing] China with a wet noodle.” He was joined by a handful of local businesspeople and activists who said they’d been hurt by competition with China.

Curtis Ellis, communications director for Save American Jobs, said, “Chinese factories don’t pay enough for workers to buy the goods they make….Soon no one will be able to buy anything.”

Lori Merhidge, president of Manhattan Lace, said in the face of competition with foreign suppliers, the Franklin Lakes, N.J.-based company founded by her grandfather in the Forties has dwindled from an operation with three factories and more than 40 employees to just her. Most of the downsizing has come since 1995, she said.The proposed tariff, she said, could help her lace-manufacturing business, since “it would raise the prices on goods from China.” But Merhidge, 29, said she feared domestic apparel manufacturing might be too far gone to save.

“Is there a future for manufacturing? I don’t know there is,” she said. While there may be room for small niche firms like hers, she said, “The problem with a niche is it’s small and manufacturing works on scale.

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