Tweet
Chuck Schumer says it's time to force China to play by the same rules as all other countries
The Treasury Department once again declined to label China a currency manipulator, despite arguing that the yuan “remains significantly undervalued” and should rise further. They basically patted themselves on the back and tried to show that their policy of engagement with China has worked to this point.
China “has substantially reduced the level of official intervention in exchange markets since the third quarter of 2011,” the Treasury said in a statement accompanying its semi- annual currency report to Congress yesterday. The yuan has gained 9.3 percent in nominal terms and 12.6 percent in real terms against the dollar since June 2010, the Treasury said.
“It appears that the strategy of the last two administrations to use diplomacy rather than confrontation in dealing with the yuan’s value is having some positive results,” William Reinsch, president of the National Foreign Trade Council, a Washington-based business group, said in an e-mail after the report. “There is clearly room for further appreciation, however.”
Chuck Schumer, the lead sponsor of the anti-currency manipulation bill in the Senate, said in a statement, “This report all but admits China’s currency is being manipulated, but stops short of saying so explicitly. The formal designation matters because there can be no penalties without it. It’s time for the Obama administration to rip off the band-aid, and force China to play by the same rules as all other countries.” The bill, probably as much as the Treasury Department’s engagement, has led to Chinese re-valuation, though you would rarely hear anyone in Treasury admit that.
Moreover, the bill takes an agnostic approach to currency manipulation. We know that, even if China has stopped manipulating its currency for now, other countries have more than taken up the slack. And that has led to a loss of 4% of US GDP, which means millions of jobs. Indeed, this isn’t just about China; the Treasury Department hasn’t designated ANYONE a currency manipulator since 1994. The designation carries minor penalties, which would be strengthened by the Schumer bill.
Meanwhile, China “stopping” currency manipulation doesn’t mean that the yuan is properly valued, as virtually everyone with expertise in the field acknowledges. And there are economic consequences to that, as seen in the annual trade deficit. But US corporations who have factories in China would rather not see any pressure on Chinese currency, as they benefit from the low appreciation. That’s the real factor here.
More from Reuters.
6 Comments
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About FDL News Desk
There’s a certain Justice Schumer aura in that portrait, no?
Wouldn’t the U.S. calling anyone else a currency manipulator be as the pot calling the kettle a quantitative easer?
Well said blueokie. The only way to not manipulate a currency is to not have one.
I have toned back my following of day to day political gyrations, and I’m fascinated how out of touch this makes me feel on issues like this that make absolutely no policy sense. I don’t understand the concept of ‘manipulation’ as the politicians are using it. That word implies some sort of natural state.
Plus, I’m confused substantively. Why do we want a cheaper dollar? That makes wage stagnation worse, not better. The vast majority of our economy is domestic production and consumption of key things like energy, food, healthcare, housing, and education. Cheap crap from China is a much, much smaller component of US GDP. The defense/security/intel industry alone dwarfs all combined imports from China.
The economic challenge we face is the domestic distribution of resources, not some action of ferners and terrsts from China to Iran.
Yeah pretty much. It always amuses me that governments are *shocked* to learn that other governments also are going to act in ways they think are in the best interest of their country.
I get what your saying but it also has to do with being part of a global market. I suspect this was about bringing jobs back home by making it cheaper to produce here in comparison to other places. A lot of people seem to think the problem started when we lost our manufacturing base and went to a primarily service sector economy.
I’m not certain that what is being done is 100% right though. As you’ve pointed out a lot of what we consume is domestic. Perhaps our focus should be on improving the service sector rather than attempting to work our way backwards and regain the manufacturing sector. The sad thing is that I suspect that attempts to improve that the service sector will be met with resistance.
Also not all of that defense/ security and intel money stays domestic. Lockheed Martin, who collected over 10 billion in 2010, has a presence in around 75 different countries. Northrop Grumman is also a multinational with ties to 24 different countries. So the defense monster is incredibly complex.
Yeah, completely agree that a lot of people hold that view.
To flesh that out a bit:
I think the reason a lot of people hold that view, though, is not because it is accurate, but rather precisely because of xenophobic and racist scaremongering by politicians like blaming China for currency manipulation. This is to distract from the real issue, which is that wage stagnation, unemployment, and related economic challenges exist in the US because of US public policy (social insurance, minimum wage, overtime, paid leave, etc.). Chinese workers simply aren’t relevant to that discussion. It is like discussing paper cuts in a discussion about how to fix our healthcare system.
Or to put it differently, if manufacturing jobs were inherently better than service jobs (rather than the creation of public policy), then who exactly were the characters described by universally known writers like Dickens and Sinclair? Our political leaders are trying to whitewash the entire labor movement, as if safety nets and worker rights recognized by the state are unrelated to workers getting paid decent wages.