Should Congress Interfere with China's Currency Policies? >
Chinese Currency Bill Won't Spark Trade War
China will respond to pressure if the U.S. passes currency bill
October 13, 2011
About Scott Paul:
Scott N. Paul is the founding Executive Director of the Alliance for American Manufacturing. Prior to forming the Alliance, Mr. Paul was the principal lobbyist for the Industrial Union Council and was a trade lobbyist at the AFL-CIO. He served as a staff member to the late Rep. Jim Jontz and former Rep. Peter Barca and as the chief foreign policy and trade advisor to then-House Democratic Whip David E. Bonior.
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.
[Read about a Congressional bill aimed at making China raise the value of its currency.]
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.
[See a collection of political cartoons on the economy.]
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.
- View: a slide show of 5 bright spots in the U.S. economy.
- Read more: about the deficit and national debt.
- Browse: the month's best political cartoons.
- Other Arguments
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#2177104
Yes — China's currency policy has cost millions of American jobs
JOSEPH GAGNON, Senior Fellow at Peterson Institute for International Economics
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#3171190
No — Trade freely with the Chinese regardless of exchange rates
DONALD J. BOUDREAUX, Professor of Economics at George Mason University
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No — Imposing a tariff on imports will adversely affect the American economy
ANDREW ROTH, Vice President of Government Affairs at Club for Growth
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#575176
No — Don't Blame China for U.S. Economic Woes
YUKON HUANG, Senior Associate at Carnegie Endowment for International Peace
Reader Comments Read all comments (14)
Steve of CA 3:22PM March 13, 2012
Addie of NH 4:16PM January 22, 2012
Addie of NH 4:16PM January 22, 2012