Oct 13, 2011
Fears of a global trade war are looming after the US Senate approved rules aimed at penalising China for holding down the value of its currency.
The proposed legislation is the latest of a series of steps under review by governments to help to boost their exports to stimulate stuttering growth.
China and other critics warn such measures are raising trade tensions and risk hastening a slide into a recession.
"There's a lot more scope for this to get a lot more serious," said Charles Robertson, the global chief economist at Renaissance Capital in London. "You've got US unemployment at 9 per cent and Europe going back into recession and both have huge trade deficits with China."
The Democrat-led Senate on Tuesday backed legislation that would impose tariffs on imports from countries with undervalued currencies.
Momentum behind the rules has been driven by the belief that the Chinese yuan has been kept artificially low, giving the country an unfair advantage by making its goods cheaper overseas.
The bill in its present form is unlikely to win the approval it needs from the Republican-led House of Representatives to pass into law. But high unemployment means Barack Obama, the president, will be under pressure to pass a similar proposal.
The fact US legislators are considering ways to force the hand of the world's biggest exporter of manufactured goods is symptomatic of the increasing readiness of governments to weigh protectionist measures, say economists. Protectionist rhetoric and action have been on the rise in recent months as governments struggle to create jobs and kick-start cooling domestic economies... read more>>
