By Kira Zalan |
Congress should pass a China currency bill and President Obama should sign it. This legislation is bipartisan, enjoys broad public support, and is one of the very few things Washington can do to assist in creating jobs without spending tax dollars. Until we achieve more balanced trade with China, it will be virtually impossible to revive our struggling economy.
China is acting in its own short-term interest by undervaluing its currency. That alone is not reason enough for action. But China's currency policy affects American exports and jobs, which does make it our business. While Washington cannot change China's currency policy unilaterally, if Congress provides new tools for businesses to seek recourse under U.S. trade law, we will effectively deter further currency manipulation.
The consequences of China's currency policy have been devastating. China's cheating has destroyed American jobs: 2.8 million jobs from 2001 to 2010, according to one estimate. We have a $273 billion annual trade deficit with China and just recorded the worst decade for American manufacturing in our history—even worse than the Great Depression.
Fred Bergsten, director of the Peterson Institute for International Economics, has called China's currency policy "the most protectionist measure taken by any major country since World War II." To let China continue this policy would be willful neglect.
The remedy proposed in Congress is an effective one. It will not spark a trade war, nor will it raise prices for consumers. That's because China relies on access to the American consumer market. Instead, the legislation will deter China from continued manipulation of its currency while allowing U.S. manufacturers to compete on a more level playing field.
Ending China's currency manipulation could create as many as 2.25 million American jobs and reduce our budget deficit by up to $71.4 billion per year, according to a recent study.
We know that China responds to pressure. Beijing has nudged the yuan upward several times since 2005 to avoid threatened sanctions.
China's currency policy is the most onerous tax on American business. It serves as a 30-40 percent tariff on American exports headed to China. No wonder we only export $1 of goods to China for every $5 we import. It's time to repeal this tax. Bipartisan currency legislation in Congress is the first step toward such relief.
About Scott Paul Executive Director of the Alliance for American Manufacturing
Joseph Gagnon Senior Fellow at Peterson Institute for International Economics