WASHINGTON, D.C. – In advance of the 2014 U.S.-China Strategic and Economic Dialogue (S&ED), U.S. Sens. Sherrod Brown (D-OH) and Jeff Sessions (R-AL) urged President Obama to take immediate and necessary actions to crack down on currency manipulation. In order to protect American jobs and ensure the competitiveness of U.S. manufacturers, the senators called for the Administration to support the Currency Exchange Rate Oversight Reform Act. Their bipartisan legislation would use U.S. trade law to punish countries like China that distort trade by misaligning its currency.
“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.”
According to an April 2014 report by the U.S. Treasury Department, the Chinese yuan, or renminbi (RMB), remains significantly undervalued. But despite this evidence of misalignment, the Treasury has failed to designate China a “currency manipulator.” And while the Administration applauded China’s commitment during the 2013 S&ED to adopt a market-determined exchange rate, China has yet to deliver on this commitment. Brown and Sessions therefore called for President Obama to take further action to stand up for American workers and address China’s currency manipulation.
This includes supporting their bipartisan legislation, the Currency Exchange Rate Oversight Reform Act. The bill would use U.S. trade law to counter the economic harm to American manufacturers caused when countries unfairly undervalue their currency to give their exports an unfair price advantage. 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 recent report by the Economic Policy Institute (EPI) found that ending currency manipulation could reduce the U.S. trade deficit by as much as $500 billion within three years, increase GDP by as much as $720 billion, and create as many as 5.8 million American jobs—all while reducing the federal budget by as much as $266 billion. The report concluded that, “ending currency manipulation is the best available tool for stimulating demand for domestic output and ending the hangover of excess unemployment from the Great Recession.” Further, a December 2012 report by the Peterson Institute for International Economics concluded that currency manipulation by foreign governments had cost the U.S. from 1 million to 5 million jobs and increased the U.S. trade deficit by $200 billion to $500 billion per year.
The Currency Exchange Rate Oversight Reform Act is endorsed by, among others, the American Federation of Labor and Congress of Industrial Organizations (AFL–CIO), Alliance for American Manufacturing (AAM), American Iron and Steel Institute (AISI), Coalition for a Prosperous America (CPA), Fair Currency Coalition, National Council of Textile Organizations (NCTO), National Tooling and Machining Association (NTMA), Precision Metalforming Association (PMA), and United Steelworkers (USW).
According to the State and Treasury departments, the S&ED is the highest-level bilateral forum between the United States and China to address the challenges and opportunities that both countries face on a wide range of bilateral, regional, and global areas of immediate and long-term economic and strategic interest. The S&ED was established in April 2009 by President Obama and Chinese President Hu following an earlier series of talks first initiated in 2006 by the Bush Administration.
Brown’s and Sessions’ letter to President Obama can be read in its entirety below:
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.
Sherrod Brown Jeff Sessions
United States Senator United States Senator