We Can Do Something to Spur a More Rapid Recovery—Combat Foreign Currency Manipulation
People wrongly think the economy is like the weather, a natural force outside of our control. So thinking about problems like high unemployment and declining wages leave people feeling hopeless because they seem to result from large historic forces that we can’t affect like globalization.
The truth, however, is that the economy isn’t like the weather: It’s entirely man-made and the rules are set by politics, not God or nature. Globalization is real, but the terms of globalization—the rules for how the internationalization of trade and production operates and affects workers and companies—are set by politicians and the organizations they’ve created through international treaties. We can change those rules and shape globalization so it does less harm to working people in the United States and around the world.
One of those rules changes would prevent companies from manipulating their currencies to make their exports cheaper while simultaneously making goods imported from other countries more expensive. China, Japan, and other countries have done this for years, buying hundreds of billions of U.S. dollars to weaken their own currencies and making it cheaper and easier to export goods to the United States. This strategy has been very successful, and together, China, Singapore, Taiwan and several other countries, including Japan, export hundreds of billions of dollars more to the United States in manufactured goods than we send to them, leaving us with a huge trade deficit that costs jobs and undermines wages here. The Peterson Institute for International Economics estimates that foreign currency manipulation has cost the United States between one million and five million jobs.
One solution is tough legislation that would offset the impact of currency manipulation on imported goods by imposing a countervailing duty. Each house of Congress has passed such legislation in the past, but no bill has been agreed to by both and sent to the president for signature. It’s time for Congressional leaders to reach across the aisle and across the Capitol and enact legislation, rather than engaging in theatre. My colleague Robert Scott has encouraged the president to use the Emergency Economic Powers Act to block the purchase of U.S. assets by foreign governments that engage in currency manipulation.
Another solution, endorsed by 230 House members and 60 senators, is for the United States to negotiate “strong and enforceable foreign currency disciplines” in the Trans-Pacific Partnership and all other future trade agreements. It would be even more impressive if those senators and congressmen would refuse to approve any future treaty or implement legislation that doesn’t ensure an end to currency manipulation. Nothing less will get the administration to stand up for U.S. workers
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