WASHINGTON, D.C. – In the wake of a new agreement among Congressional leaders to extend Trade Adjustment Assistance (TAA) before passing three free trade pacts, U.S. Sen. Sherrod Brown (D-OH) applauded Majority Leader Harry Reid’s insistence on passing TAA first and called for swift passage of the Currency Reform for Fair Trade Act. This bipartisan legislation, authored by Brown and Sen. Olympia Snowe (R-ME), would crack down on Chinese currency manipulation.
“Extending Trade Adjustment Assistance is an important step to respond to job loss caused by foreign competition. But addressing unfair trade practices like Chinese currency manipulation can prevent job loss by ensuring a level playing field for American manufacturers facing a flood of cheap Chinese imports,” Brown said. “With up to 2 million jobs that may be hanging in the balance, Congress must take action immediately.”
Yesterday, Senate Majority Leader Reid and Minority Leader Mitch McConnell reached an agreement to vote on extending TAA before taking up free trade agreements with South Korea, Panama, and Colombia. In May, Brown led 41 U.S. Senators in urging President Barack Obama not to submit any free trade agreements until Congress agrees to extend a long-term extension of TAA. In June, Brown introduced stand-alone legislation to extend TAA for five years.
“It’s time to put American jobs and American workers first by assisting laid-off workers and standing up to currency manipulation and other predatory trade practices,” Brown said in June.
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.
 See Paul Krugman, “Chinese New Year,” New York Times, January 1, 2010 (China “follows a mercantilist policy, keeping its trade surplus artificially high. And in today’s depressed world, that policy is, to put it bluntly, predatory.”); and Comments at Economic Policy Institute Forum, March 12, 2010.
 C. Fred Bergsten, Comments at Economic Policy Institute Forum, March 12, 2010; C. Fred Bergsten, “How Best to Boost Exports,” Washington Post, February 3, 2010; A15 (The exchange rate “is the most important factor in determining U.S. export competitiveness.”).
 Steven Dunaway, “China’s Exchange Rate Policy: The Heat Is On,” Council on Foreign Relations Expert Brief, February 18, 2010.