Imposing trade sanctions on China for "currency manipulation" would be "a colossal policy blunder" and do little to generate jobs in the US, a leading free-market research institute said yesterday.

 

A report by the influential Cato Institute challenged the notion that imports from China were a major cause of US job losses and disputed claims by many in the US Congress that Beijing was using currency manipulation to gain an unfair trade advantage.

 

"A closer look at China's exchange rate and its impact on trade shows that the fixed exchange rate has not given an unfair advantage to imports from China nor hindered the ability of American exporters to sell in China's own growing market," Cato trade policy director Daniel Griswold wrote.

 

"Nor have the exchange rate and trade with China caused a contraction of America's overall manufacturing base. In fact, our booming trade with China has been a blessing for tens of millions of American families and a profitable opportunity for thousands of American companies and their employees."

 

Griswold said the surge in imports from China has had a relatively small impact on US producers because they have taken the place of imports from other economies including Japan, South Korea, Taiwan, Hong Kong, Singapore, and Malaysia.

 

"Real output of US factories has actually increased by 50 percent since China fixed its currency in 1994," he wrote.

 

"Rising imports from China have not so much replaced domestic production in the US as they have imports that used to come from other lower-wage countries."

 

He added: "Critics overlook the huge benefits to Americans from trade with China. Most of what we import from China fits in the category of consumer goods that improve the lives of millions of Americans every day at home and in the office. China is now a major market for US companies and an important source of capital for the US economy."

 

Zhou Shijian, a standing councilor of the China Association of Foreign Trade, described the report as a "fair account of Sino-US trade relations."

 

"If the US really wants to cut its trade deficit with China, it should relax strict restrictions imposed on high-tech exports to China," said Zhou, also former vice president of the China Chamber of Commerce of Metal and Chemicals Importers and Exporters.

 

Most Chinese exports to the US are labor-intensive products in which the nation lacks the competitive edge to compete with manufacturers in low-income countries.

 

"Even if China stopped exporting such goods, the US would still have to import from other countries, and the trade deficit would remain."

 

Mei Xinyu, a research fellow at the Chinese Academy of International Trade and Economics Cooperation, a think-tank of the Ministry of Commerce, said the report "reflects the hard reality of the Sino-US trade ties."

 

"That is, China's foreign exchange rate regime does not give its exporters any unfair advantage as has been claimed by many in the US Congress."

 

Debate has been raging in the US in recent years on whether China uses its fixed exchange rate to gain an unfair trade advantage.

 

A US government report in May stopped short of labeling Beijing a "currency manipulator" which could have triggered sanctions but attacked China for making "far too little progress" in reforming its exchange rate.

 

Some US lawmakers have said they would press for stiff tariffs on Chinese-made goods if there is no progress on trade and exchange rates.

 

The Cato Institute, founded in 1977, is a non-profit public policy research foundation headquartered in Washington, DC.

 

(China Daily July 13, 2006)