Wes Hickman (202-224-5972) or Kevin Bishop (864-250-1417)
– U.S. Senator Lindsey Graham (R-South Carolina) today joined with Senator Charles Schumer (D-New York) to introduce legislation placing a 27.5 percent tariff on all Chinese goods entering the United States.
The tariff legislation is in response to China’s decision to continue pegging their currency at a rate of 8.28 yuan to $1 American dollar.
“It’s pretty simple – China cheats,” said Graham. “They artificially peg their currency below its true value making their goods cheaper.
“Words alone will not change China's behavior,” said Graham. “We've talked this issue to death. It is now time to act.”
Economists have estimated the yuan may be undervalued by 15 to 40 percent. China intentionally lowers their currency's value making their goods and services cheap internationally. When Chinese manufacturers export a product, it receives a 15 percent to 40 percent discount which provides them with a nearly insurmountable advantage over U.S. producers.
“It’s not about being outworked, or being smarter than the American worker, it’s really about American companies fighting the Chinese government,” said Graham. “I think most American consumers want to make sure that American businesses are protected.”
“This is a common ground between Republicans and Democrats, supported by the American manufacturing community,” said Graham. “It’s my belief that if the bill goes to the floor of the U.S. Senate, it will pass.”
“The Schumer-Graham legislation gives China ample time to make the necessary, structural changes to the valuation of their currency,” said Graham. “If China wants to be part of the international community, it’s time for them to clean up their act. Until they are reigned in and start playing by the rules, our manufacturing industry will continue to bleed jobs because of unfair Chinese trade practices.”
“We need to have a policy of engagement with China that is serious across the board,” said Graham. “Intellectual property theft, manipulating currency, transshipping goods -- there is a variety of activities they engage in that are costing us jobs in the United States. We need to address all of these issues. The tariff bill is a good way to get the Chinese’s attention and show them we are very serious about their cheating.”
Summary of the Legislation
The legislation helps American workers by addressing the growing problem of China's deliberate undervaluing of its currency to gain an unfair trade advantage. It encourages negotiation with China to level the playing field so that China's goods compete at their true market value.
The legislation reduces the export advantage provided by China's unfairly and illegally undervalued currency.
After a six-month negotiation period between the US and China, if such negotiations are not successful, the amendment would institute a 27.5 percent tariff on all China's exports to the United States that is symmetrical to China's currency advantage. Most economists estimate China's currency is undervalued between 15 percent and 40 percent; 27.5 percent is at the midpoint of that range. This tariff would apply across the board to products from China and would lay on top of any current tariffs that may apply.
If the President determines after 6 months that China is making significant progress towards revaluing its currency, he may delay imposition of the tariff for another 6 months. At the end of the second 6 months, if the President determines that China has developed and started actual implementation of a plan to revalue its currency, he may delay imposition of the tariff for another 12 months.
Provides the President with the authority to remove the tariff.
The President could remove the tariff once he certifies to Congress that China has agreed to substantially revalue its currency upwards to "at or near its fair market value." The legislation does not specify that China adopt a free floating currency, which many argue could further destabilize the Chinese banking system.
Establishes a reasonable time period for negotiations.
The legislation authorizes sanctions to begin 180 days after enactment, which allows the Secretary of the Treasury, in consultation with the US Trade Representative, and others a full six months to work with the Chinese Government to institute currency reforms.
Works within the framework of international trade laws.
Article XXI of the General Agreement on Tariffs and Trade allows a member of the World Trade Organization to take "any action which it considers necessary for the protection of its essential security interests," particularly "in time of war or other emergency in international relations". Our nation's manufacturing capability is a vital national interest and we believe it is threatened by China's unfair currency practices.