AFL-CIO: Yuan shifts show need for currency in trade deals

AFL-CIO: Yuan shifts show need for currency in trade deals
© Greg Nash

The AFL-CIO says China’s currency devaluations this week bolster the case for global trade agreements to cover exchange rate policies.

The labor union’s president, Richard Trumka, said the drop in the value of the yuan, also known as the renminbi — 4.4 percent over three days — “provides further confirmation that the failure to include enforceable currency disciplines in the TPP [Trans-Pacific Partnership] leaves a gaping hole in U.S. trade policy.”

He said now it is time for the Obama administration to insist on adding currency rules in the TPP that can be enforced through trade sanctions.

ADVERTISEMENT

"Such rules would also bind China should it ever join such a pact, and those rules could then become a global template for putting an end to the scourge of currency manipulation and undervaluation," Trumka said.

Trumka argued that the failure to deal with currency manipulation in China and in other countries is central to the widening U.S. trade gap and manufacturing's decline.

“China’s currency manipulation lowers the wages of Chinese workers and lowers manufacturing costs in China, creating an unfair trade advantage that has already cost millions of American jobs and closed thousands of American factories,” Trumka said. 

"It has turned trade agreements into trade tragedies and made the trade deficit a major drag on economic recovery," he added.

Officials with the People’s Bank of China on Thursday tried to quell fears about the yuan's sinking value, which has roiled global markets and raised concerns about Beijing's ability to manage its currency.

Zhang Xiaohui, an assistant governor at China's central bank, said during a news conference that "there is no basis for the continued depreciation of the renminbi."

“In the future, the renminbi will be back on the appreciation track," he said according to news reports.

Yi Gang, the central bank's deputy governor, pushed back against assertions that the yuan would be allowed to lose 10 percent of its value, a figure some economists say would be needed to provide a boost to Chinese exports and the overall economy.

"This is nonsense and is totally unfounded," Yi told reporters.

Chinese officials said they are letting the yuan's value become more market-oriented.

“This devaluation undoes four years of progress in rebalancing China’s unfair currency advantage," Trumka said. "Relying on China’s good will regarding its exchange rate is a dangerous folly that leaves the U.S. economy and working families exposed."