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Counting Down to 2005: China’s Strong Currency Heightens Trade Debate

As the end of quotas nears, industry experts wonder if China will float its currency, and if the U.S. will clamp down on Chinese imports.

Lung said he believed it is important for the U.S. to recognize that, in dealing with China, it’s not necessarily in a position to act unilaterally. With its enormous population and growing economic power, China is perhaps positioned to become the world’s next superpower.

“The U.S. cannot say, ‘This is what I want to do,’ and expect China to say, ‘Fine,’” Lung said.

For their part, textile lobbyists said they regarded it as highly unlikely that China would float its currency anytime soon.

“They won’t do it,” said Charles Bremer, director of international trade at the American Textile Manufacturers Institute. “There is a lot more at stake here than just trade in textiles and clothing. It affects everything they export.”

Bremer called the Kalish’s trade-off theory “a figment of one’s imagination.”

He argued that he doesn’t believe the U.S. will actually push China all that hard to revalue its currency, because he said that nation is a major buyer of Treasury bonds.

“They are our creditors and we’re not going to take any action to upset them,” he said.

Jock Nash, Washington attorney for Spartanburg, S.C.-based Milliken & Co., said he considered the growing exchange-rate debate “a diversion” from the discussion of trade policy and its effect on U.S. employment.

“The problem with China is that they have 1.3 billion workers that are educated, dedicated and low wage,” he said. “They are going to beat us whether the yuan is correctly valued or not.”

He said even if China were to float its currency, it could come up with other ways to boost exports and limit imports if it wished to.

Some importers argued it’s also possible that China’s currency is fairly valued, reasoning that its apparel export prices are comparable to those of other developing nations.

“I don’t know that it is artificially low,” said Peter McGrath, president of purchasing at Plano, Tex.-based J.C. Penney Co. Inc., who also serves as head of the U.S. Association of Importers of Textiles & Apparel. “A lot of the merchandise we order from India, Pakistan and Vietnam is competitively priced.”
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