U.S. workers pay for undervalued Chinese currency

On Friday a U.S. House of Representatives committee approved a bill that supporters say would address the problem of jobs being lost to China.

 

The currency-reform bill in the House calls on the U.S. Commerce Department to assess whether a country’s currency manipulation is unfairly subsidizing its exports, and to take that manipulation into account when creating duties.

“Countervailing duties would be available to any U.S. industry that could demonstrate that it has been ‘materially injured’ by imports from the country with the undervalued currency,” said Democratic Rep. Sander Levin of Michigan, chairman of the House Ways and Means Committee, in a statement. “For years, U.S. workers, businesses and farmers have been held to a competitive disadvantage because of China’s intervention to keep the price of Chinese goods to the U.S. artificially low and of U.S. produced goods to China artificially high,” Levin said. “The bill will help to provide meaningful relief to those who are harmed by China’s exchange-rate policy.”
Persistently high unemployment rates and the upcoming U.S. elections mean the stakes are rising. While China said in June that it would allow more exchange-rate flexibility, there has been little movement since then.
In the U.S., there is “frustration that the correction is not occurring, and that the imbalance will aggravate recession internationally,” said William Cline, senior fellow at the Peterson Institute for International Economics.
The full House of Representatives is expected to vote next week on the currency bill. But the Senate is unlikely to pass similar legislation, said Douglas Paal, vice president for studies at the Carnegie Endowment for International Peace.

What it means for workers

How bad is the current situation for U.S. workers?
The trade deficit with China is expected to displace more than 500,000 U.S. jobs in 2010, according to a recent analysis by the Economic Policy Institute, a labor-focused Washington think tank.
In 2010, the growth of U.S. exports to China will support 195,000 more jobs, but there will also be 761,000 jobs lost because of growing imports from China, according to EPI.
“As we import steel and toys and textiles from China, the production of those goods in the United States tends to fall,” said Robert Scott, senior international economist at EPI. “Because Chinese goods are cheap, the U.S. buys exports from China, thereby leading to a growing trade deficit and fewer U.S. jobs.”