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China-U.S. Trade Issues (CRS Report for Congress)

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Release Date Revised July 1, 2007
Report Number IB91121
Authors Wayne M. Morrison, Foreign Affairs, Defense, and Trade Division
Source Agency Congressional Research Service
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Summary:

The continued rise in the U.S.-Chinatrade imbalance, complaints from severalU.S. manufacturing firms over the competitivechallenges posed by cheap Chinese imports,and concerns that U.S. manufacturing jobs arebeing lost due to unfair Chinese trade practiceshave led several Members to call on theBush Administration to take a more aggressivestance against certain Chinese tradepolicies deemed to be unfair. For example,some Members argue that China's currencypolicy undervalues its currency (the renminbi,or yuan) vis-a-vis the U.S. dollar, makingU.S. exports to China more expensive, andU.S. imports from China cheaper, than theywould be if the yuan were fully convertible. Anumber of bills have been introduced to addressChina's currency policy, including somethat, and others that would apply U.S. countervailinglaws (dealing with government subsidies)to nonmarket economies (based on thebelief that China's currency policy is an indirectgovernment subsidy). On July 21, 2005, China announced it would appreciate itscurrency to the dollar by 2.1% and begin topeg the yuan to a basket of currencies. However,many Members have expressed disappointmentthat the yuan has not appreciatedsignificantly. On November 16, 2005, theSenate agreed to consider S. 295, a bill whichwould raise U.S. tariffs on Chinese goods by27.5% unless China appreciated its currencyto market levels, no later than March 31,2006. In the House, legislation (H.R. 3283)was passed (July 27, 2005), which wouldapply U.S. countervailing laws on governmentto non-market economies, such as China.(Some Members believe that China's currencypolicy constitutes a type of export subsidy.)