The latest U.S. trade figures came out on Tuesday morning and the news is ugly. Our growing trade deficit will threaten job creation in any economic recovery that begins to take shape. Not only did the monthly U.S. trade deficit increase, but exports to China actually dropped in February.
These are important points because Congress and the Administration have critical roles to play in bringing our trade deficit down. Congress can begin by passing legislation to hold China and other countries accountable for the manipulation of their currencies, which has cost the U.S. well in excess of one million jobs. Our overall trade deficit with China has led to 2.4 million lost jobs since 2001 in every congressional district in America.
Senators Schumer, Graham, Stabenow, Brown (OH), and others are doing terrific work on currency legislation. Senator Schumer has said he wants a vote on their bill by May. We agree—pass the legislation and put an end to China’s currency manipulation. Congressman Tim Ryan has authored legislation (H.R. 2378) that is similar, though not identical. Congress should remember this: major changes in our trade balance and exchange rate policy have always been helped along by congressional action.
The President should also be prepared to replicate the actions taken by President Richard Nixon in 1971 (import tariffs) and President Ronald Reagan in 1985 (currency rate adjustment through the Plaza Accord) to create jobs and reduce our trade deficit. The Administration is taking a three month deferment on its decision to name China as a currency manipulator, a report to Congress normally due on April 15. If three months elapse without a meaningful adjustment in China’s currency, China should obviously be named as a manipulator. Otherwise, as Harvard professor Niall Ferguson said at a recent hearing, the U.S. will be considered “the wimps of the Western world.” Regardless of the decision to name China as a manipulator, the legislation should proceed. The more penalties for cheating, the less likely cheating will become. It’s sound public policy, a terrific economic stimulus (Economist Fred Bergsten estimates that eliminating currency manipulation will create a minimum of 700,000 jobs), and doesn’t cost taxpayers a dime. The only opposition to the legislation comes from outsourcers and ideologues. My simple message is this: want jobs? Stop currency manipulation now.