China Currency Bill

Executive Summary

China Currency bill was passed by the US senate on September 2011 with the idea of charging tariff from countries that were involved in the act of devaluing their currency. China was considered to be heading this league since it has been involved in such activities for quite a long time. China is an emerging prominent player of the global economy in the beginning of the 21st century. This bill is considered to be a controversial topic amongst the senate, as China is amongst the top countries in the world and at the same time is U.S's top trading partner as U.S's major chunk of imports are from China. Keeping into consideration, the US economy's greater bargaining power in front of China as it is among the leading importers of Chinese goods as well as China's repeated distortion of free trade, China currency Bill could be enacted into law. Therefore, China currency bill needs to be enacted and US should be the one to take the lead without worrying about any trade war consequences.

Table of Contents

Hypothesis1

Background1

Rationale1

Discussion1

Conclusion2

References3

China Currency Bill

Hypothesis

“If the China Currency Bill is enacted into Law, It will Cause a Trade War with China”

Background

China Currency bill was passed by the US senate on September 2011 with the idea of charging tariff from countries that were involved in the act of devaluing their currency (www.topics.nytimes.com). China was considered to be heading this league since it has been involved in such activities for quite a long time. The law stated that higher tariff rates should be charged from countries that devalue their currency so as to discourage other countries to import from them (Forooha, Rana, 2011, Pp.17) This way countries such as China, would not be able to enjoy their intended economic advantages and would not cause the rest of the world to suffer with a higher trade deficit either. China has been enjoying this economic advantage for years now causing its trade partners to suffer the effects. The process of devaluing the currency helps the economy of that country, by having a positive effect on its exports since it becomes less costly for other countries to import (Ceglowski, Janet, 2007, Pp.597-600). As a result, such countries import more, causing their local or domestic markets to suffer.

Rationale

What compelled me into opting for this topic has to do with the emergence of China as a prominent player of the global economy in the beginning of the 21st century. Statistics indicate the rising trend of its GDP from over 9% since 1980 (Beattie, 2011), making it not only the third largest trading economy, but also the fourth largest economy when it comes to market exchange rates. On one end, where many countries have gained from these low-priced goods of China, others express rising concerns for losing not just their export markets, but also their domestic markets which have been flooded with these Chinese goods. (Jenkins, Rhys, 2008, Pp. 1351-1355)

Discussion

This bill is considered to be a controversial topic amongst the senate, ...