The Chinese government recently devalued their currency, the Yuan, multiple times in a couple of days in an effort to artificially cheapen its exports to the US and other nations. We have been writing about currency manipulation by China as a main reason our economy is weak and good paying jobs are rare.
This time there is a difference. In the past, China intervened as a deliberate act to gain advantage and steal American jobs. This time, it is an act of desperation. The “China Miracle” which is, and always was, a house of cards is now coming apart. The big question is how this will affect the rest of the world and the U.S. and how we can limit the damage now that we have given away so much of our economic sovereignty to global entities.
On May 14, 2015, the Senate passed strong a currency manipulation bill called the Trade Facilitation and Trade Enforcement Act of 2015 (S 1269), by an overwhelming vote of 78-20. The bill would allow effectively tailored sanctions against economic harm caused by currency manipulation by other governments. The House should vote upon and pass that bill when it returns from August recess.
The Chinese government’s aggressive intervention in the market shows that President Obama was wrong when he asserted, in his speech at Nike 5/8/15, that currency manipulation was a problem of the past. Foreign government intervention in currency markets is an ongoing threat to US economic growth and jobs. It also violates free market principles. In this case, Chinese exports that are not price competitive will now be artificially cheaper. US products that are domestically and globally competitive will now be artificially more expensive.
President Obama and Ways and Means Chairman Paul Ryan, during the “Fast Track” debate, argued strenuously against strong currency disciplines in future trade agreements. They rejected the truism that hard-fought trade concessions we win from other countries can be quickly nullified by currency manipulation. The main stream media will finally be talking about the currency war that has been waged on the world since China was allowed to join the world trading regime.
US trade policy has reduced, rather than increased, our country’s economic growth because of an outdated focus upon tariffs and quotas instead of modern trade cheating tactics. Other countries can make concessions, and then negate them by devaluing their currency, increasing border taxes, and increasingly subsidizing state owned or controlled companies that export.
The US Trade Representative’s office has failed to address this new mercantilism. The ‘high standards’ rhetoric of the USTR regarding trade agreements is largely empty.
Please call Congressman Cresent Hardy at (202) 225-9894 and ask him to vote for the companion bill to S 1269 when it hits the House floor. Congress also needs to make clear that any new trade agreements without effective currency remedies will not be approved.
Frank Shannon served in the U.S. Army, was an engineering/operations manager for AT&T for 27 years, was the owner of a small manufacturing business for 23 years, served as Colorado Chair of the Coalition for a Prosperous America and moved to Mesquite in 2013.