When a strong dollar hurts.

While the U.S. dollar freely fluctuates relative to most foreign currencies, such is not the case with the Chinese yuan. By virtue of pegging its currency to the dollar, prices of Chinese furniture are much lower than they should be, further hampering U.S. manufacturers' ability to compete.

This is the message Edward Tashjian, vice president of marketing for Century Furniture Industries Inc. of Hickory, NC, brought to Capitol Hill. Appearing before the House Committee on Small Business on June 25, Tashjian said, "China's currency has remained fixed at about 8.3 yuan to the dollar since 1994. The stability of the currency over that period is at odds with economic fundamentals. China's emergence as both an export powerhouse and a destination for foreign direct investment should tend to exert upward pressure on the yuan."

Because of its money manipulation, Tashjian said, "the yuan is substantially undervalued." He cited analysts at Goldman Sachs and Foreign Exchange Analytics as estimating the under valuation to be 15% and 50% respectively.

"This under valuation contributes measurably to the trade deficit between the U.S. and China, and is a substantial factor in the competitive challenges faced by U.S. furniture producers. Domestic furniture producers are in the position of a sprinter whose opponent regularly gets a 30-50 yard head start."

Tashjian urged U.S. trade authorities to monitor and enforce China's adherence to the World Trade Organization agreement and "avoid manipulating exchange rates to gain an unfair competitive advantage."