China's Currency Wall Claims Jobs

September 15, 2010
Politico (Opinion)

By: Thomas J. Gibson

The United States is facing the worst jobs crisis since the Great Depression. National unemployment sits at an unacceptable 9.6 percent. President Barack Obama has responded by launching a National Export Initiative, which seeks to double U.S. exports over five years — a laudable goal.

But the policies proposed for this initiative are unlikely to achieve this goal. They do not begin to address a fundamental cause of our massive trade deficit and related unemployment: China’s deliberate undervaluation of its currency. This helps Chinese industries — at the expense of competing industries in the United States and around the world.

The United States has lost more than 2.4 million jobs to China in the past decade, according to the Economic Policy Institute. How is China stealing these good-paying jobs? Simple. Beijing uses mercantilist and market-distorting industrial practices, like undervaluing its currency, to give its producers an unfair export advantage over global competitors.

Leading economists now estimate that China’s currency, the yuan, is undervalued by as much as 40 percent — which translates into a significant export subsidy. This sharply undermines U.S. efforts to increase exports and jobs and creates large, chronic trade deficits that are unsustainable.

But while Beijing promotes its industries, Washington has been sitting on the sidelines.

The Treasury Department has already missed two critical opportunities this year to cite China as a currency manipulator, as mandated by law. China promised in June that it would allow its currency to float more freely — but so far the yuan has increased less than 1 percent.

If the Obama administration is not prepared to act, then Congress must help U.S. industries defend against the adverse effects of foreign currency manipulation. Reps. Tim Ryan (D-Ohio) and Tim Murphy (R-Pa.) have introduced bipartisan legislation, the Currency Reform for Fair Trade Act, which would empower the Commerce Department to use existing laws to give U.S. industries a remedy for the injuries caused by currency manipulation.

Sen. Chuck Schumer (D-N.Y.) has introduced similar legislation in the Senate.

Ignoring China’s unfair trade policies does not make this problem disappear. Beijing’s currency manipulation is the government’s single largest subsidy to Chinese manufacturers. Our U.S. manufacturing base, including the steel industry, has taken a significant hit because of this.

Between 2000 and 2009, China’s steel production jumped from 15 percent to 47 percent of the world’s production. Between 2001 and 2008, the United States experienced nearly $1.5 trillion in cumulative manufacturing trade deficits with China. There is no doubt that China’s protectionist policies, like currency manipulation, are promoting Chinese jobs and investment at the expense of U.S. manufacturers.

It is helpful that the House Ways and Means Committee is holding another hearing Wednesday on the currency issue. But it is long past time for this Congress — and this president — to act. It is urgent that Congress now passes the Ryan-Murphy bill and that Obama sign it. No other action could send a stronger message to China that it must change its ways.

Washington cannot continue to sidestep the need to confront Beijing’s damaging trade policies. The administration needs to use every available tool to insist that the government of China correct the fundamental misalignment of the yuan. We can no longer give Beijing a free pass.

U.S. manufacturers can compete with anyone in the world — but we can’t win against foreign governments. We keep hearing about plans to tackle our unemployment problems. Here is an answer that will strengthen our economy: It can level the playing field, so manufacturers increase the products made in America — and not cost the U.S. government a dime.

Revaluing China’s currency could help create at least 1 million U.S. jobs, according to many economists. If Congress is serious about reviving the economy and getting Americans back to work, now is the time to act.

Thomas J. Gibson is president and chief executive officer of the American Iron and Steel Institute, whose member companies produce more than 75 percent of the steel made in America.

Nancy Gravatt
Vice President, Communications
American Iron and Steel Institute
Tel: 202.452.7115