| By refusing to cite China for unfairly manipulating its currency, the U.S. Treasury Department poured salt into the wounds of an already bleeding U.S. manufacturing sector. Treasury Secretary John Snow's resignation, however, has provided Congress an opportunity to intervene on the currency issue - something it must do to stanch U.S. manufacturing job losses. By intentionally undervaluing its currency by as much as 40 percent, China simultaneously subsidies its export capability and places a de facto tariff on U.S. exports entering the Chinese market. Currency manipulation is one of many subsidies that enable Chinese companies to lower their prices artificially, by 25 to 30 percent below market value in the case of textiles and clothing, with predictable effect. China's exports to our market surge, while U.S. export growth to their market lags. China's unduly gained advantage also forces U.S. companies then to lower their costs to meet the "China price." Often this is done by shuttering U.S. operations and moving U.S. jobs to China. Beleaguered companies attempting to stay in the United States frequently are compelled to cut jobs, wages, and benefits. The devastating impact of China's predatory trade actions is clear. The U.S. trade deficit with China skyrocketed from $83 billion in 2001 to $202 billion in 2005, with the cumulative imbalance totaling $673 billion! Meanwhile, 2.875 million middle-class U.S. manufacturing jobs disappeared. Weekly wages for America's 92 million non-supervisory workers stagnated, rising by less than one percent after inflation since 2001 according to MBG Information Services. Americans pay for China's subsidies in other ways too. More and more workers are losing employer-provided health care and pension benefits. These costs then are passed on to taxpayers in the form of fewer public services or higher taxes to pay for increased government spending. Moreover, Americans are not the only ones hurt by unfairly subsidized Chinese exports. They also destroy jobs in Latin America when export growth from Mexico and Central America is stunted. In fact, China devalued its currency 45 percent when NAFTA went into effect in 1994 to prevent Chinese-made products from losing market share to Mexican-made goods. The Federation for American Immigration Reform (FAIR) estimates that 10 to 12 million illegal aliens currently reside in the United States and that another 500,000 new illegals enter annually. FAIR also estimates that illegal immigrants directly cost U.S. taxpayers a net $45 billion per year. Without a doubt, many workers from Latin America who lost their jobs or job opportunities to subsidized Chinese exports now are in America illegally. Indeed, the true cost of China's predatory trade is both hidden and high. The pain suffered by American industry and its workers as a result of China's cheating is undeniable. Yet unconscionably Treasury still does nothing as the offshoring of our middle class accelerates, rendering toothless the current law that requires the department to single out currency manipulators. This brings us back to the need for Congress to act. By passing the statute that forces Treasury to determine whether countries are manipulating their currencies, Congress delegated its authority. Since Treasury refuses to do its duty, Congress must reassert itself by passing legislation that (1) defines China's actions as currency manipulation and (2) imposes tariffs on U.S. imports from China until the manipulation ceases. Two bipartisan bills already have been introduced that would address the problem. S. 295, sponsored by U.S. Senators Lindsey Graham of South Carolina and Charles Schumer of New York, would place a 27.5 percent tariff on imports from China until they float their currency. H.R. 1498, sponsored by U.S. Representatives Duncan Hunter of California and Tim Ryan of Ohio, would define currency manipulation as an illegal subsidy, thus allowing U.S. companies to apply for penalty (countervailing) duties against Chinese exports that are damaging the U.S. market. As the U.S. trade deficit with China continues to rise, now is the perfect time for Congress to signal Treasury in no uncertain terms that legislation will be passed and the department should fall in line. Passing legislation penalizing currency manipulation is not the silver bullet that suddenly will make U.S. manufacturing competitive with China, but it will start leveling the playing field. Auggie Tantillo is the Executive Director of the American Manufacturing Trade Action Coalition. |