Senators Sherrod Brown (D-Ohio) and Jeff Sessions (R-Ala.) issued an appeal Tuesday to President Obama to crack down on currency manipulation, which has cost 5.8 million U.S. jobs and increased the federal budget deficit by $266 billion. They also asked the president to support the Currency Exchange Rate Oversight Reform Act, which would mandate federal action against currency manipulation.
A press release from Senator Brown's office explained:
“China’s currency manipulation weakens our economic recovery and makes U.S. exports less competitive, which is why we must combat it with every tool in our toolbox,” the Senators wrote. “To date, the Administration’s efforts to achieve a market-based exchange rate in China have not succeeded. We believe it is time to develop a comprehensive national strategy for fighting currency manipulation and leveling the playing field for American workers and businesses.…We believe our bill, the Currency Exchange Rate Oversight Reform Act, is a critical component of any national effort to address China’s currency manipulation, and we will push for a vote on it in Congress this year.”
Why This Matters
My February post, "Want 5.8 Million New U.S. Jobs? Do This" explained:
Currency manipulation makes the U.S. dollar more expensive than it would be in a free currency market. This means that products made and services performed in the U.S. cost more than products made and services performed in other countries. Business migrates to companies located in the manipulators’ countries, which costs U.S. jobs and increases the trade deficit.
A report released today by the Economic Policy Institute (EPI), titled “Stop Currency Manipulation and Create Millions of Jobs,” shows how currency manipulation by China and others are costing the United States between 2.3 million to 5.8 million jobs.
According to the report, realigning exchange rates could:
- Reduce U.S. trade deficits by up to $500 billion per year by 2015;
- Increase U.S. GDP by up to $720 billion per year (a 4.9 percent increase);
- Support creation of up to 5.8 million jobs (a 4.1 percent increase); and,
- Increase manufacturing jobs by up to 2,337,300 jobs (a 15.9 percent increase).
Also, increased tax revenues and reduced safety net expenditures would reduce the 2015 federal budget deficit by up to $266 billion, up to an 86.1 percent decline in the projected federal deficit.
The Currency Exchange Rate Oversight Reform Act
The Currency Exchange Rate Oversight Reform Act passed the Senate in 2011 but was obstructed by House leadership from coming to a vote. Reintroduced in 2013 by Senators Sherrod Brown (D-OH), Jeff Sessions (R-AL), Chuck Schumer (D-NY), Lindsey Graham (R-SC), Debbie Stabenow (D-MI), Richard Burr (R-NC), Susan Collins (R-ME), and Robert Casey (D-PA), the bill would require the administration to take action when countries are manipulating their currencies to harm U.S. economic interests. Also, "The legislation would provide consequences for countries that fail to adopt appropriate policies to eliminate currency misalignment—all without adding a dime to the federal budget."
A complete summary of the Currency Exchange and Oversight Reform Act of 2013 can be read HERE.
Here is the text of the Brown/Sessions letter:
June 10, 2014
The White House
Washington, D.C. 20500
Dear Mr. President:
We write to express our ongoing disappointment with the Administration’s response to the yuan’s undervaluation. China’s currency manipulation weakens our economic recovery and makes U.S. exports less competitive, which is why we must combat it with every tool in our toolbox. To date, the Administration’s efforts to achieve a market-based exchange rate in China have not succeeded. We believe it is time to develop a comprehensive national strategy for fighting currency manipulation and leveling the playing field for American workers and businesses.
The Treasury Department’s April 2014 biannual report on international exchange rate policies found that the yuan, or renminbi (RMB), remained significantly undervalued. The report detailed multiple factors that underscored the ongoing intervention in the RMB exchange rate, including “excessive” foreign reserves, a persistently large current account surplus, and an “unprecedented” depreciation earlier this year. Even though its own report presents overwhelming evidence that warrants labeling China a “currency manipulator,” Treasury failed to make this designation.
Diplomatic overtures to China about the yuan have fallen short as well. At the 2013 Strategic & Economic Dialogue (S&ED), the Administration applauded China’s commitment to adopt a market-determined exchange rate. This year’s S&ED dialogue is fast approaching and that goal has not been met. While China widened the yuan’s floating band and allowed gradual appreciation to occur, recent intervention has reversed this progress and calls into question China’s dedication to achieving a floating exchange rate.
American businesses and workers face the brunt of China’s unchecked currency manipulation. The undervalued yuan erodes the bottom line of otherwise competitive U.S. companies, which as a result fill fewer orders and create fewer jobs. According to analysis by the Economic Policy Institute, eliminating currency manipulation would create between 2.3 and 5.8 million American jobs, 40 percent of which would be in the manufacturing sector. It would also reduce the goods trade deficit by at least $200 billion.
U.S. efforts to address currency manipulation have been inadequate, and the economic consequences of this failure have been too significant not to make changes to our approach. In advance of the 2014 S&ED meetings, we request that the Administration develop and make public a detailed plan to fight currency manipulation. This plan should identify each available forum, diplomatic avenue, and trade remedy and the measures to be taken with each of these tools. The strategy should also include a timeframe for actions, including a consideration of steps to be taken if China does not meet its commitments.
We believe our bill, the Currency Exchange Rate Oversight Reform Act, is a critical component of any national effort to address China’s currency manipulation, and we will push for a vote on it in Congress this year. In addition to signing this legislation when it reaches your desk, we ask you to craft and share with us a comprehensive strategy to achieve a market-based exchange rate for the yuan. It has been too long and too little progress has been made to delay any longer.
United States Senator
United States Senator