WASHINGTON, D.C.—U.S. Sen. Sherrod Brown (D-OH) released the following statement today after new trade deficit numbers were released by the U.S. Department of Commerce showing that the trade deficit with China had widened from $26.7 billion in June to $27 billion in July. The trade deficit with China through July 2011 totaled $160 billion, up from $145 billion over the same time period in 2010.
“Our widening trade deficit with China underscores the need to stand up for Ohio manufacturing by cracking down on Chinese currency manipulation. We know that Ohio manufacturers and workers can compete with anyone in the world, but are undermined when Chinese imports priced artificially low flood our markets,” Brown said. “This month’s trade numbers show once again that our deficit with China continues to widen. Over the same time period last year, our deficit with China has grown 10 percent to $160 billion. This is a disturbing trend that must be reversed.
“Strong trade law enforcement—including cracking down on China’s illegal currency manipulation—is critical to closing the trade gap with China and America’s other trading partners,” Brown continued. “It’s past time for Congress to act on the Currency Reform for Fair Trade Act, which would give the United States the power to respond appropriately to unfairly subsidized exports from countries like China. Ohio and American manufacturers have waited long enough for action, and now is the time to address China’s flagrant trade law violations once and for all.”
In June, the Economic Policy Institute released a new report showing that addressing Chinese currency manipulation could support the creation of 2.25 million American jobs. The Currency Reform for Fair Trade Act of 2011 would give the Obama Administration additional tools to address China’s currency manipulation.
The Economic Policy Institute report examined the effects on the American economy if China was to revalue the yuan to its equilibrium level, and other Asian countries followed suit. The report found significant benefits for the American economy:
- U.S. GDP would increase by as much as $285.7 billion (1.9 percent);
- As many as 2.25 million American jobs would be created – enough to increase total U.S. employment by 1.6 percent; and
- The U.S. budget deficit would decrease by up to $71.4 billion per year – or between $621 to $857 billion over 10 years, if sustained.
Brown and Snowe’s bill is similar to a measure passed in 111th Congress, H.R. 2378, the Currency Reform for Fair Trade Act of 2010, which passed in 2010 by a vote of 348-79, including 99 Republicans. The legislation, which directs the U.S. Department of Commerce to treat currency undervaluation as a prohibited export subsidy, would ensure the government is equipped to respond on behalf of American workers and manufacturers by imposing countervailing duties on subsidized exports from countries like China.
The impact of China’s currency manipulation has been widely documented by economists:
- Paul Krugman, winner of the 2008 Nobel Prize in Economics, estimates that China’s exchange rate policy reduces U.S. GDP by 1.4 to 1.5 percentage points annually and reduces U.S. employment by 1.4 to 1.5 million jobs.
- Fred Bergsten, Director of the Peterson Institute for International Economics, estimates that a 20-40 percent appreciation of the RMB would result in $100-$150 billion improvement in the U.S. trade deficit and would generate 700,000 to 1 million jobs in the U.S.
- Steven Dunaway, a former IMF official and senior fellow at the Council on Foreign Relations, has noted that some analysts expect an appreciation would add half a percentage point to GDP in the United States and other developed countries.”
Brown led the House opposition to the Dominican Republic – Central America Free Trade Agreement (CAFTA) in 2005, falling just two votes shy of blocking the agreement after the vote was held open for nearly two hours. The author of the book Myths of Free Trade and described as “Congress’ leading proponent of American manufacturing,” Brown also stood up to President William J. Clinton during debate of the North American Free Trade Agreement (NAFTA) in 1994.