In the 15 months since China announced that it would float its currency, the renminbi (RMB) has appreciated a paltry 6 percent against the U.S. dollar, well below what economists say it should. In fact, according to one reputable estimate, the RMB is still 28 percent below its true value.
The impact on America is clear. The currency manipulation by China costs at least 1 million American jobs, according to Fred Bergsten, director of the Peterson Institute for International Economics. Bergsten has said it “is by far the largest protectionist measure adopted by any country since the Second World War — and probably in all of history.” Nobel Prize winning economist Paul Krugman estimates that the cost of China’s action is closer to 1.5 million jobs.
Yet in the face of compelling evidence for action, Republican leaders have offered no plans to bring up the Currency Reform for Fair Trade Act that I reintroduced this year together with Democratic Rep. Tim Ryan of Ohio and Republican Rep. Tim Murphy of Pennsylvania. The bill is designed to rein in China’s currency manipulation and has more than 200 co-sponsors. A virtually identical bill passed the House a year ago with support from the majorities of both parties.
What’s more, the Senate is preparing to act on legislation this week that includes the central components of the House bill.
Meanwhile, China continues to purchase U.S. Treasury bills in order to leverage its currency and maintain its low value. Combined, the practices artificially lower the cost of imported Chinese products and increase the cost of American exports to China.
The Currency Reform for Fair Trade Act (H.R. 639) would allow countervailing import duties for U.S. industries that are injured by the undervalued RMB. The Commerce Department, as a result of the legislation, would have the authority to impose import tariffs to offset the negative consequences of China’s undervalued currency. The bill reverses a current Commerce Department practice that has precluded it from treating foreign government currency practices as an export subsidy while also directing the department on how to measure subsidies provided to foreign producers through currency undervaluation.
Overall, the measure could help reduce our trade deficit by $200 billion.
Our nation’s workers and businesses deserve a level international playing field, and this measure provides concrete action to help make that a reality. With 14 million Americans still looking for work, it is far past time that Republican leaders took up legislation that has a history of bipartisan support and will help strengthen the hands of American workers and businesses.
There is no excuse for inaction. The specter of a “trade war” has been raised by opponents, as it is so often used against action. It masks the fact that there is economic competition — indeed, a battle — among nations and it is unwise to let the other nation refuse to abide by long-ago-developed international rules to help prevent trade wars, including rules against currency manipulation.
House Republican leaders argue that the focus should be on other Chinese practices, relating to lack of protection of intellectual property and technology transfer requirements. We should be pursuing action on all fronts — instead of playing one off against another — especially since there has been no legislative action by the House majority on any.
Levin is the ranking member on the House Ways and Means Committee.