What a difference a week makes. Just last week, the Beijing government and outsourcers thought they could run out the clock and avoid a long overdue legislative reckoning on China's currency manipulation, which serves as a drag on global growth, a siphon for American jobs and wealth, and an inflator of dangerous imbalances in the world economy.
But following a rapid succession of events this week, Congressional action on China's cheating looks increasingly likely. The chances for passage of a bipartisan bill in Congress that would deter China from manipulating its currency have improved dramatically.
Let's review the week's developments:
- H.R. 2378, the Tim Ryan (D-OH)-Tim Murphy (R-PA) bill on currency, gained 16 new cosponsors, including key members of the Ways and Means Committee. Meanwhile, about 100 Members of Congress--including more than 30 Republicans--urged the Speaker to schedule the bill for a vote.
- In testimony before House and Senate committees on Thursday, Treasury Secretary Timothy Geithner took a much harder line on China than he had just three months ago.
- House Speaker Nancy Pelosi told CNBC's John Harwood that she supported bringing legislation to the floor, provided that it is compliant with global trade rules. (Testimony given at a hearing on Wednesday left little doubt that the legislation is, in fact, on solid legal ground.)
- The Economic Policy Institute estimated that ending China's currency manipulation could add as much 1.4 percent to economic growth in the U.S., based on calculations made by Nobel laureate Paul Krugman. That would lead to $500 billion in additional revenue--or deficit reduction.
- Even the Chinese government got into the act, raising the value of its currency, the Yuan, to a new high against the dollar, definitively proving that it (a) manipulates the exchange rate, and (b) responds to political pressure from the U.S.
So what will next week bring? Predictions of trade wars, arguments for inaction or quiet diplomacy, and ridiculous defenses of Beijing's mercantilism. We'll look forward to tackling those myths one day at a time. Stay tuned.