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STEVE CHIOTAKIS: Now the global perspective. What’s happening in business and economics around the world and how it affects the United States. Today, Treasury Secretary Tim Geithner testifies before the Senate Banking Committee. He’s gonna say China’s currency is purposely undervalued to boost its exports. Needless to say that’s been responsible for the outsourcing of American jobs. The blame game is a huge election year issue.
Europeans meanwhile, are grappling with what to do about the cheap costs of Chinese goods. The EU claims fiberglass is being unfairly dumped into its markets. So today the EU voted to tack on a huge tariff on the material — up from a 7 percent duty to more than 50 percent — to offset the threat of jobs and production losses there. Marketplace’s Stephen Beard is covering that story and has the latest for us live from London. Hi Stephen.
STEPHEN BEARD: Hello Steve.
CHIOTAKIS: Fiberglass, really? How big an issue is this?
BEARD: Well it is a lightweight material after all. It’s not a huge industry. I mean they use this to make composites for wind turbines, car bodies, ship hulls and so on. Not a gigantic market in Europe. It’s worth about $1.5 billion a year. The Chinese have 15 percent of that market, but that’s double what they had a couple of years ago. And the Europeans say they’ve grabbed that market share by dumping their products below cost price on the European market. I would say this is a symbolically important case. It puts the spotlight on EU-China trade relations. It shows the U.S. isn’t the only trade partner having trouble with the Chinese.
CHIOTAKIS: Now we know, Stephen, about the trade deficit the U.S. has with China, but what’s the situation between China and the EU?
BEARD: The EU’s deficit is at $160 billion a year. That’s the less than America’s deficit, but it’s growing. And there’s the same kind of frustration here as in the U.S. with the Chinese for allegedly holding down their currency, dumping cheap products. And it’s claimed not appreciating that by not opening up their markets more and stimulating their own consumer demand, they could be jeopardizing the global recovery. So EU-China trade relations definitely deteriorating.
CHIOTAKIS: And is this, Stephen, the beginning of a trade war?
BEARD: Too soon to talk I think about a trade war, but tensions are definitely building. Simon Tilford at the Centre for European Reform says we probably can expect quite a few more measures like this extra tariff on fiberglass.
SIMON TILFORD: These Chinese I think need to acknowledge that the Europeans and the Americans now feel that they have pretty much exhausted other avenues and they feel that they’re going to have to adopt tougher measures against the Chinese authorities.
This week, a Chinese think-tank warned that the U.S. would come off worse in a trade war with China. Tilford says that’s nonsense. He says that since China has upset both of its biggest markets, it has the most to lose.
CHIOTAKIS: Marketplace’s Stephen Beard reporting from London. Stephen, thanks.
BEARD: OK Steve.
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