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China illegally subsidizes its export industries and unlawfully manipulates its currency. That kills U.S. industry and destroys U.S. jobs. On June 19, China announced it would allow its currency value to rise on international markets. And then it didn’t. That’s flipping the bird at America. Before China’s June 19 promise, U.S. Senators and Congressmen proposed legislation that would force the U.S. Treasury Department to even the score with China. Pass the legislation. It’s time for America to flip the bird back.

China is disrespecting America.

The Asian giant is an international trade outlaw, and U.S. manufacturers and workers are its crime victims.

China illegally subsidizes its export industries and unlawfully manipulates its currency. That kills U.S. industry and destroys U.S. jobs. Earlier this year, the Obama administration asked China nicely to allow its currency value to float up naturally on international markets. On June 19, China said it would.

And then it didn’t.

That’s flipping the bird at America.

Before China’s June 19 promise, bipartisan groups of lawmakers in the U.S. House and Senate proposed legislation that would force the U.S. Treasury Department to even the score and to call China out for what it is: a currency manipulator. Hearings on the bills are being conducted this week.

Pass the legislation. It’s time for America to flip the bird back.

Negotiation and threats have failed to produce a sustained, substantial currency float by China. Now, the Chinese currency, the renminbi, is undervalued by as much as 40 percent, a figure accepted by conservatives like C. Fred Bergsten of the Peterson Institute for International Economics. Even the International Monetary Fund managing director said the currency is undervalued.

China simply denied it. In March, the Chinese premier, Wen Jiabao, said he did not believe the renminbi was undervalued. That’s flipping off the world.

It works like this: China prints renminbi to buy billions of U.S. dollars, which makes them appear more desired and valuable, and the renminbi, by contrast, less valuable. That undervaluation of the renminbi acts as a subsidy for Chinese exports, artificially making them as much as 40 percent cheaper when sold in the U.S. Conversely, it acts as a tax of as much as 40 percent on American-made goods sold in China.

This dynamic contributed significantly to the rise of manufacturing in China. Earlier this year, China surged past Japan to become the world’s second-largest economy. And it contributes significantly to America’s massive trade deficit. Thegap in July was $42.8 billion, more than half of which -- $25.9 billion -- was a result of trade with one country – China.

China’s rapid economic growth has ended poverty for millions of its workers.  Here in the United  States, however, China’s flouting of international trade law is destroying the lives of millions of workers. The Economic Policy Institute estimates that 2.4 million American jobs have been lost or displaced since 2001 as a result of the trade deficit with China. American workers celebrate their Chinese counterparts’ improved quality of life, but they condemn the government of China for accomplishing that with beggar-thy-neighbor trade practices.

Earlier this year, it briefly looked like threats would prompt China to act. In March, a bipartisan coalition of U.S. Senators introduced legislation specifying the factors necessary to label a country as a currency manipulator and detailing American reprisals. And in April, the Treasury Department delayed its report identifying countries that manipulate currency rates, suggesting that it was ready to take on China.

China appeared to respond to that pressure in June. It announced it would allow the renminbi to float toward its real value on the open market. The Treasury Department backed off, omitting China from its list of currency manipulators in July.

China then permitted the value of the renminbi to rise less than one percent. One percent. When it’s as much as 40 percent undervalued. That’s flipping the bird at America. Big time.

Still, America didn’t react.

On Aug. 25, the Commerce Department announced 14 new measures to crack down on trade violations, such as ending certain exemptions from duties.

It did not, however, mention currency manipulation.

Dan DiMicco, CEO at Nucor Corp., the largest U.S. steelmaker, said the 14 measures are important, but the problem with China won’t be resolved until the United States takes on currency undervaluation. Here’s what he said:

"As long as we continue to let them get away with it, they’ll keep doing it."

Six days later, in a trade case filed by the U.S. Aluminum Extrusions Fair Trade Committee, a coalition of domestic manufacturers of aluminum extrusions and the USW, the Commerce Department again squirmed out of dealing with currency manipulation.

Commerce imposed import duties on Chinese aluminum companies because China unfairly subsidized $514 million in aluminum exports to the U.S. in 2009. But Commerce refused to investigate the Fair Trade Committee’s evidence that China’s currency manipulation functions as an additional illegal export subsidy.

Sen. Chuck Schumer of New York, a sponsor of currency manipulation legislation, said afterward:

"The Commerce Department made its finding while still managing to ignore the elephant in the room, which is China’s currency manipulation."

Commerce and Treasury have decided the proper response to China flipping off America is averting their eyes.  See no evil.

Yesterday Japan followed China’s lead. It bought dollars and sold yen, decreasing the value of yen and increasing the value of dollars. This, the New York Times explained, was "a bid to protect its export-led economy." That’s exactly what China is doing.

It’s a very public show of contempt for international regulations and for American citizens.

Normally, Americans don’t respond passively to contempt.  Be normal, America.

Originally posted to Leo W Gerard on Thu Sep 16, 2010 at 08:33 AM PDT.


America should live in fear of China. It should let China do whatever it wants, no problem.

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Comment Preferences

  •  Are we a (0+ / 0-)

    nation of welshers?

    This is all about trying to welsh on US debt . . . trying to pay back the money borrowed (from China) with Dollars that are worth less than those loaned.

    If you want China to float the Yuan (renminbi) against the Dollar then restructure all US debt to China in Yuan (renminbi) at the present exchange rate.  Then, and only then, can you ask for an exchange rate float . . .

    Simple, eh?

    Fake Left, Drive Right . . . not my idea of a Democrat . . .

    by Deward Hastings on Thu Sep 16, 2010 at 08:53:29 AM PDT

    •  This is all about the US Working Class (1+ / 0-)
      Recommended by:

      China is enacting a protectionist peg to protect itself against social unrest.

      If a trade war were to ensue between the US and China, and the US loses, the ruling party cedes power to the GOP.

      If China loses, its government falls.

      I like the US odds.  I say that US Congress should brand China a protectionist currency manipulator, and invoke the associated sanctions.

      This is about free trade, about ensuring that US working and middle-class don't fall prey to protectionist Chinese mercantalist policies.

      Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

      by PatriciaVa on Thu Sep 16, 2010 at 09:09:15 AM PDT

      [ Parent ]

    •  I believe you mean "welch" not "Welsh" n/t (0+ / 0-)

      There is a time for good progressive Democrats to attack the failings of their party's leaders--but right before an election is exactly the wrong time.

      by Subversive on Thu Sep 16, 2010 at 09:21:38 AM PDT

      [ Parent ]

    •  And who ran that risk? (1+ / 0-)
      Recommended by:

      The borrower or the lender?  The U.S. debt comes in a variety of bonds dated at different lengths whose nominal rates are determined at periodic auctions and whose yields fluctuate with trades, futures swaps, and subsequent auctions.  

      If you buy such a security, you run the risk of a decrease in value.  But what you are not entitled to do, under international trade laws to which China is a signatory, is inflate the value of the asset by depreciating your own currency.

      Whether the U.S. is defaulting on its debt is not the issue -- we are honoring the agreed upon interest payments.  What the noteholders get in return is not our problem.

      "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

      by Loge on Thu Sep 16, 2010 at 10:16:47 AM PDT

      [ Parent ]

      •  China is not (0+ / 0-)

        "depreciating [their] own currency".  It is pegged to the Dollar . . . a fixed exchange rate.  It is the proponents of "floating" the Yuan who want to revalue the Dollar to avoid paying legally incurred debt.  China has tried to resolve this issue by using their Dollars to buy assets (Unocal, for example), but the US Government has objected.

        This is not about China "cheating" or not followint "the rules", it is about the US cheating (or wanting to) . . .

        Fake Left, Drive Right . . . not my idea of a Democrat . . .

        by Deward Hastings on Thu Sep 16, 2010 at 11:35:00 AM PDT

        [ Parent ]

  •  Here's the framing: (2+ / 0-)
    Recommended by:
    ezdidit, Sunspots

    "You're either with America, or you're with the Communist Chinese Government."  Too many billionaire CEOs have cast their lot with the authoritarian, human rights-abusing Communist Chinese govenment, but that's to be expected if you look at how they run their businesses and treat their employees.  They don't care squat about Democracy; it is antithical to everything they believe in, based on their actions.  But what about our government and elected officials?  Are they for America or for the Communist Chinese government?

  •  The Chinese are in bed with our multinational (3+ / 0-)
    Recommended by:
    maracucho, ezdidit, Sunspots

    corporations.  They do not want the yuan to float either.  We are being gamed.  If the U.S. government had a problem with the Chinese currency, they would take action.  They don't but they have to appear to be addressing the issue.  

    "When fascism comes to America, it'll be wrapped in a flag and carrying a cross." Sinclair Lewis

    by lakehillsliberal on Thu Sep 16, 2010 at 09:03:02 AM PDT

  •  To hell with Robert Rubin, China is peripheral (2+ / 0-)
    Recommended by:
    ezdidit, Rich in PA

    We have a tremendous increase in Americans in poverty, a shrinking of middle class incomes and retirement prospects that began with Dubya Bush. The problem is the US tax structure and media culture which encourages outsourcing, jobs without benefits and one person households.

    We don't need a trade war with China. We don't need to continue Bush's tax cuts; we should not swallow the bs about tax increases hurting small business. We should ask why so many Democrats, such as Senator Dodd, are so against Elizabeth Warren. Why perpetuate the financial arrangements that have destroyed so many working Americans?

  •  This issue deserves more attention than it gets (1+ / 0-)
    Recommended by:

    "These old Wall Street boys are putting up an awful fight to keep the government from putting a cop on their corner." - Will Rogers

    by Lefty Coaster on Thu Sep 16, 2010 at 10:09:50 AM PDT

  •  I'm not sure I understand why China... (1+ / 0-)
    Recommended by:
    Anak supposed to use its sovereign power to help the United States rather than to help China.  Frankly I think all of this whining is unbecoming and pathetic.  

    The most impressive thing about man [...] is the fact that he has invented the concept of that which does not exist--Glenn Gould

    by Rich in PA on Thu Sep 16, 2010 at 10:50:56 AM PDT

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