Labor & Employment Law

China?s Currency Announcement: ?Hokum? and ?Charade?

By James Parks

The Chinese government’s announcement that it will allow its currency, the renminbi (RMB), also known as the yuan, to increase a small amount in value is a step in the right direction. But it is inadequate to address the “dramatic imbalances caused by many years of currency manipulation,” says AFL-CIO President Richard Trumka.

While acknowledging that the “AFL-CIO appreciates the efforts of the Obama administration to address China’s currency imbalances,” Trumka joined Charles Blum, executive director of the Fair Currency Coalition, in calling on Congress and the Obama administration to act to address the imbalance. Trumka also said the issue of currency imbalance should be on the agenda at the G-20 summit in Ontario later this week.

In a statement, Trumka said:

Chinese currency manipulation is an issue with global impact….Most economists believe that the renminbi is currently about 40 percent undervalued against the dollar. What is needed now is a commitment from the Chinese government to rectify this imbalance.

Writing on robertreich.org, University of California, Berkeley, professor and former Labor Secretary Robert Reich calls China’s currency move “hokum” and further warns that

China isn’t really changing anything. It’s only doing the minimum to prevent Congress from listing China as a currency manipulator, leading to a squeeze on Chinese imports.

At Huffington Post, Scott Paul, director of the Alliance for American Manufacturing, calls China’s move a “charade.” 

China’s currency will undoubtedly rise against the dollar, but the change may not be significant or fast enough to put a real dent in our enormous trade deficit or boost our exports enough to create a considerable number of manufacturing jobs….The president must demand results in Toronto this weekend and Congress must proceed swiftly with a legislative response.

Blum, who says China’s announcement is “too little, too late,” has called for passage of the bipartisan Currency Exchange Rate Oversight Reform Act of 2010. If passed, the legislation would make it easier for the Treasury Department to determine currency manipulation. The bill also provides meaningful sanctions, including countervailing duties or tariffs, if currency negotiations fail.

The bottom line: Currency manipulation is unfair and costs jobs.

“The Chinese government’s systematic and one-sided intervention in currency markets is not consistent with any trade model,” Trumka said.

It is a clear, unfair trade subsidy?and is a significant contributor to our jobs crisis. It undermines American workers and American producers every day that it is allowed to continue.

Blum adds:

As long as the RMB is substantially undervalued, producers in the United States must have access to an effective U.S. trade remedy law to counter China’s unfair export subsidies. It is a jobs and investment issue pure and simple.

Full post as published by AFL-CIO NOW BLOG on June 22, 2010 (boomark / email).