Over the years, China exported all sorts of toxic, dangerous and killer products to the United States.
There was the tainted made-in-China Heparin blood thinner that killed more than 100 Americans. There were the recalled made-in-China toys, jewelry and clothing fasteners containing toxic levels of lead. There was the made-in China drywall that emitted hazardous levels of sulphur that sickened families and corroded wiring.
Now China is exporting a different kind of problem to the United States. It's sending America its economic downturn. In May, China resumed purposely devaluing its currency, which is a tactical maneuver that tilts trade in its favor. American industry, American workers and the American economy suffer from China's currency manipulation. Dithering by the U.S. House of Representatives on this issue has reduced America to victim status.
For years, China deliberately diminished the value its currency. This artificially reduces the price of Chinese exports. Simultaneously, it artificially raises the price of U.S. exports to China.
The Peterson Institute for International Economics, hardly a liberal think tank, estimates the renminbi to be undervalued by between 25 and 40 percent. That means on every made-in-China sneaker sold in the United States, there's at least a 25 percent discount. And on every U.S.-made aircraft sold in China, there's at least a 25 percent premium layered on top of the price.
This price distortion has contributed to the shuttering of 56,000 American factories and the destruction of 2.8 million American jobs since 2000. It has abetted record annual trade deficits with China, with last year's just shy of $300 billion. In April, the U.S. trade deficit declined by more than $2 billion overall, but the specific deficit with China increased by nearly $3 billion. China's currency manipulation also means the gross domestic product rose 2 percent in the United States last year, while it increased more than 9 percent in China.
China's growth is projected to decline to 8 percent for this year -- still among the fastest in the world. Eight percent during grave financial troubles worldwide is massive. But it's not good enough for Chinese government officials. So they've taken two steps. They're stimulating their economy with a government injection of cash estimated at $150 billion. And they've resumed devaluing the renminbi.
Under international pressure, including the threat of sanctions if the U.S. Treasury Department declared China a currency manipulator, China had agreed to allow the value of the renminbi to rise. That began to occur in microscopic steps in June of 2010, until it had increased by nearly 12 percent. But that stopped in January. For months it remained unchanged.
Noting that stagnation, the Treasury Department in its report on international exchange rate policies this spring urged China to abide by the commitments it has repeatedly made to its trading partners to allow the renminbi to attain a more equitable value.
This is particularly important to the United States as the economy in the eurozone cools, reducing the amount of Chinese goods European countries buy. China may dump those products on the United States instead by further cutting the value of the renminbi. As artificially cheap as those imports would be, American industry and workers cannot afford them.
The Treasury Department determined that the renminbi remains significantly undervalued, but it concluded that China did not meet the standards required by U.S. law to be declared a currency manipulator. The report uses data on the renminbi up until May 15.
It was right about then that China began slashing the value of the renminbi. The value dropped nearly 1 percent in May, a record decline in record time.
In your face, U.S. Treasury!
Well, really, that should be: In your face, U.S. factories!
That's because it will be factories and workers who will suffer as China distorts international trade to its advantage.
In the last session of Congress, the U.S. House of Representatives passed a bill that would have eased that suffering by changing the standards under which the government legally determines that a country manipulates currency. But the Senate didn't pass it. This time, in a rare bipartisan vote, the Currency Exchange Rate Oversight Reform Act passed the U.S. Senate by 63 to 35.
A similar bill in the House has 233 co-sponsors, including 65 Republicans. But Republican House Speaker John Boehner has refused to bring it up for a vote.
U.S. Sen. Bob Casey, D-Pa., wrote Boehner last week asking him to schedule a vote on the legislation to protect American jobs and the American economy.
Boehner won't do it. And that's odd since his party's presidential candidate claims that if he's elected, he will name China a currency manipulator by fiat on his first day in office -- whether or not the U.S. Treasury legally makes that determination or the legislation passes in Congress. By contrast, Boehner is content to allow China to dominate, to render America a cowering victim.
Victimhood doesn't suit Americans well. America stands up to aggressors. The House needs to pass that legislation.
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