U.S. currency bill likely misses target
U.S. Senators Charles Schumer (D, New York) and Lindsey Graham (R, South Carolina) have announced plans to introduce a bill allowing the Commerce Department to take account of currency undervaluation when calculating anti-dumping duties.
The target is clearly China. It threatens to inflame the already rancorous and dangerously escalating dispute with Beijing over exchange rate policy to no good purpose. Legislative pressure will not make China’s government any more likely to accelerate the renminbi’s revaluation. If anything it will cause the government to postpone a revaluation most officials concede will eventually be necessary. China’s government cannot afford to show weakness in succumbing to pressure from “western devils” (“gwai lo”) without losing face in the eyes of its own public. China’s Premier Wen Jiabao has already branded U.S. pressure on the currency issue as a form of “protectionism.” The Schumer-Graham bill is likely to draw an even more angry response.
So the Schumer-Graham bill is a piece of election year theatre, but a counterproductive one. It threatens to worsen already poor relations between two countries that need to be friends but are currently experiencing a steady escalation in tensions on everything from economics to Tibet and weapons sales to Taiwan.
Trading insults is not going to bring the currency dispute any closer to resolution. The only constructive way forward is to take the issue out of the headlines, allowing China to appreciate the renminbi in its own time, prodded by a domestic inflation problem and the need to control inflows of hot money.
“CURRENCY MANIPULATION”
The U.S. Treasury Department is already required to analyze the exchange rate policies of foreign currencies and consider whether they manipulate their currencies to gain an unfair trade advantage, reporting the findings to Congress annually, under the terms of the 1988 Omnibus Trade and Competitiveness Act. The law also mandates separate six-monthly reviews of specific aspects of exchange rate and economic policy.
The 1988 law was passed the last time the United States was worried about the loss of manufacturing jobs overseas, at that time to Japan, through the alleged under-valuation of the yen. So there is nothing new in the use of legislation to tackle the perceived undervaluation of foreign currencies (or overvaluation of the dollar).
Is there any point to the IMF?
– John Kemp is a Reuters columnist. The views expressed are his own –
Institutions often outlive their usefulness. Since the end of the Cold War, NATO has often looked like an organization in search of a mission. Lately, the International Monetary Fund (IMF) has also seemed like one lost without a contemporary role.
The IMF is trying to reinvent itself as a global financial regulator or as a forum in which member states can hold mutual discussions about their banking, monetary and fiscal policies — a sort of World Trade Organisation (WTO) for finance.
Keep Dreaming..
Maybe if we all click our heels together in our magical ruby slippers we can resurrect the american middle class from the destruction of the last ten years.
I agree with George Sherman, we need to start reading labels and support our own businesses. The cheap labor or India, China, Tawian create cheap goods yes but at the expense of the United States as a whole. Look at our industrial jobs, gone. All shipped to China, India – Midal Steel anyone? When you call customer service, who do you talk to? If an American you are lucky.
There is a great balancing that will take place if globalization continues. The living standards of the United States will fall as jobs go overseas for cheaper labor and resources. If we don’t protect something then the living standards between us and the rest of the world will meet in the middle. Does anyone here want to live like they do in India or China (besides Hong Kong)? Yes its protectionism. But is it also patriotism?
Let me also say that I am a conservative before I get labelled otherwise.
Compare how we live to how Europe lives? Cost of living – through the roof, standard of living – worse than the United States for sure and Europe was once the center of the world for business. It will happen if globalization and ‘free trade’ continue. We cannot compete with cheap labor.
And yes China is completely manipulating is currency. To argue otherwise is ignorance or politics. And to say that the United States wants it only for our benefit is false. They do manipulate the currency and yes it would help us for it to float but its also protectionism on their side.