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March 30, 2010

Chinese Currency Manipulation Is Just One Piece

-- by Dave Johnson

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

I've been focusing on the Chinese currency manipulation problem because the Obama administration is supposed to make it's twice-a-year declaration on this on April 15. But even if this problem is addressed as it needs to be, keep in mind that it is just one piece of the larger problem of Chinese trade policies.

In a post the other day I listed the main unfair advantages China uses to its advantage:
1) Currency manipulation. China "pegs" its currency at a very low, or "weak" rate, so goods from China cost up to 40% less than they otherwise should.
2) Labor-rights suppression has lowered manufacturing wages of Chinese workers by 47% to 86%.
3) There is massive direct government subsidization of export production in many key industries.
4) China allows environmental degradation that ends up affecting all of us.
5) Intellectual property theft and piracy mean that American products that could be sold are stolen instead.
6) China has a number of policies that block U.S. firms from market access.

It is necessary to bring their currency to market rates, but this is not all that must be done to bring trade into balance. It helps, it doesn’t fix it.

All of these things that China is doing are collectively called a national industrial policy. China has one. We don't. China's share of the world's business has grown exponentially because they have and follow a national industrial policy. Ours has declined dramatically because we don't. I'm trying to drop a hint here, but for those in Washington who aren't following let me spell it out more clearly: America needs to develop and follow a national industrial policy.

One more thing, Senators Graham and Schumer have introduced a bill, S. 295, that will "level the playing field" with China.

Specifically, the amendment allows for a 180 day negotiation period between the US and China to revalue its currency, if the negotiations are not successful, a temporary across the board tariff of 27.5% will be applied to all Chinese products entering the United States - a penalty that corresponds to their estimated currency advantage.

It's time to call the President and your member of Congress, and tell them to let the Treasury Department know that they need to declare China a currency manipulator. And ask them to support the Graham-Schumer bill.

When you call, you can use info from this report by The Alliance for American Manufacturing and Economic Policy Institute titled, “Unfair China Trade Costs Local Jobs.” Accompanying the report is a website with an interactive map that shows job losses to by state and Congressional District:

AAM_Map
Click the map.

Also, look at CAF's breakout page on the China trade problem: On Jobs, China Has Us In The Red

Sign up here for the CAF daily summary.

Posted by Dave Johnson at March 30, 2010 12:33 PM


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