Getting Tough with China10/15/2010
Imagine a football game in which one team’s players are constantly held by their opponents, but the referees never call a penalty.
Unfortunately, this is the situation American manufacturers face every day when competing with China. Unlike other major economies, China refuses to allow the free market to set the value of its currency, the renminbi. Instead, it pegs the renminbi to the dollar at between 25 and 40 percent below the free market rate. That means it costs significantly more to buy American-made goods in China, and significantly less to buy Chinese-made goods in America, than it would in a free market. And yet our government has done little or nothing to force China to play by the rules. In fact, it won’t even officially label China a currency manipulator.
Like the football team whose opponent cheats with impunity, American manufacturers operate at an unfair disadvantage.
Some argue China’s undervalued currency is good for American consumers, since we can buy cheap Chinese-made products. What they seem to forget is that no one can buy anything if they don’t have a job. Manufacturing plants are closing in America because of China’s currency policy. In addition to hurting workers who lose their jobs, this does grave damage to other local businesses and neighborhoods. Moreover, it means America is losing manufacturing capabilities essential for our national security.
For as long as I have been in Congress, I have been working to pass legislation that would make it easier to combat China’s currency manipulation. Two weeks ago, my efforts and those of my likeminded colleagues finally bore fruit. The House of Representatives passed H.R. 2378, a bipartisan bill that I cosponsored to make it easier to impose tariffs on Chinese goods unfairly subsidized by the cheap renminbi. I hope the Senate will follow suit and pass this critical legislation as soon as it returns after the election.
There can be no doubt that China’s currency manipulation has already cost America countless jobs and is a major contributor to our trade deficit. If China stopped devaluing its currency, an estimated 500,000 American jobs would be created. This year, our trade deficit with China is on track to be $250 billion – triple what it was just 10 years ago. That’s bigger than our combined trade deficit with the European Union, Mexico, Japan, Canada, and OPEC. And while Chinese exports used to be mainly inexpensive products such as toys, today they’re selling us more and more technologically advanced products.
China also illegally intervenes in the markets in other ways. In recent years, it has done everything from provide its steel and paper producers with illegal subsidies to impose discriminatory regulations against imported auto parts.
Recently, China has shown it is willing to use its virtual monopoly on rare earth materials – minerals that are critical for many high-tech products and defense systems – for strategic advantage. This is a worrisome development that poses a direct threat to American jobs and national security. In response, I cosponsored H.R. 6160 to increase domestic mining and production of rare earths. After working to move this bipartisan bill through the House Science and Technology Committee, I recently helped pass it in the House of Representatives.
America cannot afford to ignore the challenge China poses to our economy. For proof, just look at what happened over the last decade – as Washington allowed China to continue setting the value of its currency, we lost one-third of all American manufacturing jobs.
There are those who claim that defending America’s interests invites Chinese retaliation. But this gets the issue completely backwards. What has emboldened China is America’s failure to defend itself. That is why as your representative, I will continue to fight to make sure that China is held accountable for its actions, and to protect American companies, workers, and jobs.