The manipulation of its currency by China’s government is the major problem facing American manufacturing. It’s past time the U.S. government muster the will to take strong action, even imposing emergency tariffs, to level the playing field, several experts, including economist Paul Krugman and United Steelworkers (USW) President Leo Gerard, said yesterday.
Speaking at the forum on “Currency Manipulation: How Should the U.S. Respond?” sponsored by the Economic Policy Institute (EPI) with the Alliance for American Manufacturing (AAM), Robert Scott, EPI’s senior economist, said China’s currency manipulation has cost between 1.5 million and 3 million good American manufacturing jobs.
Fred Bergsten, director of the conservative Peterson Institute for International Economics, added:
If there is going to be a serious jobs program, the exchange rate of the dollar must be at the center of the debate.
The methods that previous administrations have used to deal with the problem, which include “sweet reason,” have not worked, Scott said, and it’s time we “use a baseball bat” and impose strong tariffs on imports from countries such as China that undervalue their currencies.
The AFL-CIO, U.S. manufacturers and many economic experts maintain that China deliberately undervalues its currency to keep the value artificially low so it can boost exports and discourage imports—running up the U.S. trade deficit and costing good American jobs. An AFL-CIO report shows China’s fixed currency rate artificially lowers the price of its goods by 40 percent, effectively subsidizing China’s exports, putting U.S. companies at a competitive disadvantage and creating a record trade deficit.
Scott and Gerard said the United States needs a multistep approach to rebuilding our manufacturing. First, the U.S. Treasury Department must declare China as a country that manipulates currency, which would set off a process by which the administration can impose trade penalties. Next, Congress and the Obama administration must do what previous administrations have not done since the Nixon and Reagan years and impose tariffs on goods made in China.
William Jones, chairman of Cummins-Allison Corp. in Chicago, said that unless the playing field is leveled in currency markets, more and more businesses will close.
Detroit is our future if we don’t wake up and smell the coffee.
He says our lawmakers are living in a dream world and don’t seem to realize that China and other nations are not playing by the rules of free trade.
Krugman, a Nobel laureate, says it’s imperative to act now because the world economy is in worse shape than it ever has been and the capital surplus that China has built up through its currency manipulation “comes at the expense of everyone else.” He points out that other countries like India and Mexico are suffering even worse job losses than the United States because of China’s currency policy.
But fixing the China currency problem is not the final solution, Gerard said. The nation also needs a national manufacturing policy. The American people were sold “a bill of goods” by Wall Street that we could prosper by deregulating financial markets and focusing on free trade—both have failed miserably, he said.