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Pass the China currency bill

By PETER MORICI, UPI Outside View Commentator   |   Oct. 11, 2011 at 11:07 AM   |   Comments

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COLLEGE PARK, Md., Oct. 11 (UPI) -- The China Currency Bill is the most significant jobs bill the U.S. Congress could pass. It enjoys the bipartisan support of nearly 80 Republican and Democratic U.S. senators, yet U.S. President Barack Obama and House Speaker John Boehner, R-Ohio, oppose it, illustrating both are out of touch with the problems besetting the American economy.

The nearly $600 billion trade deficit is destroying more U.S. jobs than the mortgage crisis, too much business regulation and high healthcare costs combined.

Americans haven't forgotten how to make things or compete. Unlike what Obama would have us believe, Americans aren't undereducated dolts, unenlightened in the ways of global competition.

Rather through a failure to act on issues the president has identified -- Chinese mercantilism -- and on issues where his ideology prevents action -- the development of abundant U.S. energy -- Americans are being denied their fair opportunity to compete.

Simply, the U.S. economy suffers from too little demand for what Americans make. Americans are spending again but since the first quarter of 2009, the trade deficit is up 55 percent. In the second quarter, it was nearly $600 billion or 4 percent of gross domestic product -- thanks almost entirely to surging imports of subsidized imports from China, barriers to U.S. exports into the Middle Kingdom and higher oil prices.

Every dollar that goes abroad to purchase Chinese goods or oil that doesn't return to purchase exports is lost purchasing power that could be creating U.S. jobs. Halving the nearly $600 billion annual trade deficit would create at least 5 million jobs.

To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing undervalues the yuan by 40 percent -- simply, it prints yuan and purchases about $450 billion annually in currency markets to keep its currency and exports cheap. In the bargain, it uses some of those dollars to subsidize oil imports and drive up gasoline prices in the United States.

In addition, China provides domestic industries with more than 200 export subsidies and blocks competitive imports of U.S. cars, alternative energy products and just about anything else it chooses to promote. Currency manipulation, subsidies and insidious barriers to the sales of foreign products ranging from cars to solar panels violate the letter and spirit of China's World Trade Organization obligations to promote freer trade and provide open access to foreign goods in its markets.

All Obama does is complain. Boehner prefers to do even less. And both, with feet planted firmly in the past, cling each to ideological prescriptions that do little to address these problems.

Obama remains faithful to Food Co-Op Capitalism -- more government spending, income redistribution, overregulation, industrial policies and free trade agreements that don't reduce the trade deficit and destroy jobs. Meanwhile, Boehner adheres to Knickers-Era Capitalism -- indiscriminant cuts in taxes, spending and regulation. Both have failed America -- the former since 2008, when the Democrats took control of the House and bloated the bureaucracy and deficit, and the latter during the first six years of the George W. Bush presidency.

The China Currency Bill would permit U.S. firms and workers harmed by China's 40 percent undervalued currency to obtain relief through offsetting duties until China stops intervening in currency markets. That should jog China into finally compromising on the issue. If not, it would move some jobs back to the United States that shouldn't have left in the first place.

U.S. companies like GE and Caterpillar that have outsourced American jobs and corporate functions to China and are now clients of Beijing's protectionism have convinced Obama the China Currency Bill is protectionist and would start a trade war.

What China does is protectionist and America is already in a trade war -- China is throwing rocks and Obama is throwing words.

China is bullying America. Obama refuses to stand up to the bully and Boehner is just fine with that.

Growing up in a tough blue-collar neighborhood and the smallest boy at school, I learned whining about bullies doesn't work. Sometimes you just need to get a big stick and strike back. After a few hard blows, even big bullies can be brought to reason.

The world is a messy place and full of nasty people. Americans must address it as they find it, not as Obama's friends in neatly pressed Brooks Brothers suits tell us it should be.

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(Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former chief economist at the U.S. International Trade Commission.)

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(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

© 2011 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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