Senate Democrats

Economists Agree: China’s Currency Manipulation Contributes To U.S. Jobs Crisis

Greenspan: What China is Doing “Is the Definition of Currency Manipulation.” Former Federal Reserve Chairman Alan Greenspan said of China in June, “What they are doing is the definition of currency manipulation.” [Bloomberg, 6/17/11]

Reagan Administration Trade Official: “China Engages In Currency Manipulation.” Robert E. Lighthizer, who served as a deputy U.S. Trade Representative in the Reagan administration, testified, “China engages in currency manipulation – a major form of trade protectionism not explicitly prohibited under the WTO agreements… the U.S. government should treat currency manipulation as a subsidy for purposes of our CVD law.  In addition, the United States should officially designate China as a currency manipulator, challenge China’s currency manipulation at the International Monetary Fund (“IMF”),and bring a WTO case on the grounds that currency manipulation is a prohibited export subsidy.” [U.S.-China Economic and Security Review Commission, 6/9/10]

  • Reagan Administration Trade Official Criticized Conservatives Who Consider Cracking Down on China a “Liberal” Idea. After some conservatives questioned Republicans who wanted to “get tough on China” in 2011, former Reagan administration trade official Robert Lighthizer wrote, “can anyone really think that getting tough with China is a ‘liberal’ idea? Do you think that any of the conservatives and Republicans listed above would allow a foreign adversary to use currency manipulation, subsidies, theft of intellectual property and dozens of other forms of state-sponsored, government-organized unfair trade to run up a more than $270 billion trade surplus with us and to take U.S. jobs?” [Washington Times, 5/9/11]

Former Treasury Official: Value of Renminbi is 20%-30% Less Than What It Should Be. Former Assistant Treasury Secretary C. Fred Bergsten wrote, “The artificially low value of the renminbi — it is 20 to 30 percent less than what it should be — amounts to a subsidy on Chinese exports and a tariff on imports from the United States and other countries… If we want to avoid bankruptcy and raise growth, we have got to attack the trade deficit.” [New York Times, 9/28/11]

  • Bergsten: “I Regard China’s Currency Policy As The Most Protectionist Measure Taken By Any Major Country Since World War II.” “I regard China’s currency policy as the most protectionist measure taken by any major country since World War II,” said C. Fred Bergsten, head of the Peterson Institute for International Economics. “Its currency manipulation by our estimates has it undervalued by 20 percent to 30 percent. That’s equivalent to a 20 to 30 percent subsidy on all exports and a tariff on all imports by the largest trading country in the world.” [Washington Post, 10/4/11]

Economists: Any Benefits of China Trade Have Been “Wiped Out” By Increased U.S. Government Costs, Including Unemployment Benefits and Food Stamps. In a newly released study, a team of three economists “rated every U.S. county for its manufacturers’ exposure to competition from China, and found that regions most exposed to China tended not only to lose more manufacturing jobs, but also to see overall employment decline. Areas with higher exposure also had larger increases in workers receiving unemployment insurance, food stamps and disability payments. The authors calculate that the cost to the economy from the increased government payments amounts to one- to two-thirds of the gains from trade with China. In other words, a big portion of the ways trade with China has helped the U.S.—such as by providing inexpensive Chinese goods to consumers—has been wiped out. And that estimate doesn’t include any economic losses experienced by people who lost their jobs. “ [Wall Street Journal, 9/27/11]

Krugman: China Currency Policy “Damages the Rest of the World.” Paul Krugman wrote in 2010, “China’s policy of keeping its currency, the renminbi, undervalued has become a significant drag on global economic recovery. Something must be done… it’s a policy that seriously damages the rest of the world. Most of the world’s large economies are stuck in a liquidity trap — deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can’t offset.” [New York Times, 3/14/10]

  • Krugman: Taking Action on China Currency Can Help Alleviate National Jobs Crisis. Paul Krugman wrote, “The dire state of the world economy reflects destructive actions on the part of many players. Still, the fact that so many have behaved badly shouldn’t stop us from holding individual bad actors to account.  And that’s what Senate leaders will be doing this week, as they take up legislation that would threaten sanctions against China and other currency manipulators… Ben Bernanke, the chairman of the Federal Reserve, said it clearly last week: unemployment is a ‘national crisis,’ with so many workers now among the long-term unemployed that the economy is at risk of suffering long-run as well as short-run damage. And we can’t afford to neglect any important means of alleviating that national crisis. Holding China accountable won’t solve our economic problems on its own, but it can contribute to a solution — and it’s an action that’s long overdue.” [New York Times, 10/3/11]

Zandi: Currency Manipulation Creates a “Significant Competitive Disadvantage for All Manufacturers.” Mark Zandi of Moody’s Analytics explained, “Nothing is more important from a macroeconomic perspective for manufacturing, then to get these currencies better aligned. They are not aligned and that’s a significant competitive disadvantage for all manufacturers, increasingly other businesses as well.” [JEC Hearing, 6/22/11]

Samuelson: China’s Currency Policies Contributed to the U.S. Financial Crisis.  Columnist Robert J. Samuelson wrote, “China and others are implicated in the dollar system’s failings. By keeping their currencies artificially depressed—a way to aid exports—they abetted the very imbalances that they now criticize… It’s not just that exchange rates were (and are) misaligned. American economists have argued that a flood tide of Chinese money, earned from those bulging trade surpluses, depressed interest rates on U.S. Treasury securities and sent investors searching for higher yields elsewhere. That expanded the demand for riskier securities, including subprime mortgages, and pumped up the real-estate bubble. So China’s policies contributed to the original financial crisis (though they were not the only cause) as well as to Americans’ excess spending.” [Newsweek, 4/3/09]