Currently, the U.S. is enduring a record trade deficit of more than $600 billion and more than 25 percent of the gap is attributed directly to China.
Concern over the ever-widening chasm prompted four House Republicans to introduce legislation this week that would impose tariffs on Chinese imports. They claim the Chinese government manipulates its currency to keep the price of Chinese goods artificially low in the U.S. and the price of U.S. goods artificially high in China.
And witnesses at a Senate Finance Committee hearing this week testified on Chinese violations on everything from intellectual property theft to inequities in monetary policy
Many lawmakers believe the Chinese Government should change from its fixed monetary system, which links the Yuan to the U.S. Dollar, to a flexible one. Critics of this monetary link accuse China of undervaluing the Yuan by anywhere from 28 to 40 percent. They also believe the change in monetary policy would give the Yuan a more realistic value. Some experts claim revaluing the Asian currency, U.S. companies would have less incentive to take jobs to foreign countries.
Alan Greenspan, Chairman of the Federal Reserve Board, testified that enacting tariffs to adjust the price of Chinese goods would not solve the problem of job or manufacturing losses.
Alan Greenspan, Chairman, the Federal Reserve Board: "Any effect of trade with China is likely to be very small, relative to job creation and job loss in our economy. A policy to dismantle the global trading system in a misguided effort to protect jobs from competition would redown to the eventual detriment of all us job seekers as well as millions of American consumers."
Greenspan told the committee that enacting tariffs would most likely shift low wage jobs to other developing countries in Asia and South America.
When pressed by legislators for strategies to protect jobs, stop the theft of intellectual property, and persuade China to change its monetary policy Greenspan had no specific recommendations. Instead, the Fed Chairman suggested conducting more trade talks and using the World Trade Organization as an arbitrator.
Among the witnesses testifying from the private sector was Neal Bredehoeft, President of the American Soybean Association. With China purchasing almost 20 percent of the U.S. soybean crop, Bredehoeft recommended against legislation that could potentially damage trade.
Neal Bredehoeft, President, American Soybean Association: "In response to trade sanctions, China could replace U.S. soybeans and other ag products from other sources. The result would be a loss of a growing $3 billion soybean market for US soybean farmers that has taken us 20 years to develop.