The US–China Trade Dispute
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The US–China Trade Dispute

Facts, Figures and Myths

Imad Moosa

While the Americans accuse China of damaging their economy, the Chinese claim their policies are legitimate and that the US has no right to dictate how the Chinese economy should be run. Imad Moosa addresses contentious issues including: whether the Chinese currency is undervalued, whether the undervaluation of the yuan, should it exist, is the cause of the US trade deficit with China (hence revaluation being a justifiable cure) and whether Chinese economic policies are immoral and illegal according to IMF and WTO rules.
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Chapter 1: An Overview

Imad Moosa


THE COLD TRADE WAR In 1930, in the midst of the Great Depression, the US raised tariffs on imported goods as a result of the implementation of the Smoot–Hawley Act. That action triggered a tit-for-tat reaction from other countries, resulting in the destruction of international trade and making the Great Depression even greater. Since about 2005 the threat of a trade war has become real, symbolized by calls for the imposition of tariffs on US imports from China. On this occasion no one knows how China will react, should the US declare a trade war, but history tells us that trade hostilities are not one-sided. In May 2005 a bill was introduced into the US Congress to impose a 27.5 per cent tariff on all US imports from China unless the Chinese currency is revalued substantially. Twice a year the US Secretary of the Treasury is required to determine whether or not other countries are manipulating their currencies and if so they will be “named and shamed”. On 29 September 2010, the US House of Representatives passed legislation to punish China for “undervaluing its currency”, thereby “harming the competitiveness of US manufacturers and exporters”. The legislation would allow the US government to use estimates of exchange rate misalignment to calculate duties on imports from China. On 11 October 2011 the Senate passed the Currency Exchange Rate Oversight Reform Act, which would allow any “fundamentally misaligned currency” to be labelled a subsidy subject to countervailing duties. Unless and until these...

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