Proposed currency bill harms US, China

By Yu Xiaokui (Guangming Daily)

15:58, October 14, 2011

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Edited and Translated by People's Daily Online

The U.S. Senate passed the Currency Exchange Rate Oversight Reform Act of 2011 on Oct. 11, despite warnings from many business groups and people from all walks of life in the country. 

The bill is introduced mainly to address the charges of currency manipulation levied against China. It will allow Washington to impose punitive tariffs on Chinese exports if the value of the RMB is found to be unfairly "misaligned." Senators who voted in favor of the bill believe that a faster appreciation of the RMB will help create job opportunities in the United States and cut the country's trade deficit. 

However, the RMB exchange rate is just a scapegoat for the U.S. politicians' incompetence and is no solution to the severe unemployment in the country. U.S. business circles are worried that the bill could damage China-U.S. relations, and an increase in the value of the RMB may only benefit other developing countries instead of reviving the U.S. manufacturing industry and solving its unemployment problems. Even if the bill were signed into law, the goods from China would be more expensive, which would harm the interests of U.S. companies and households. 

For the "China currency manipulation" bill to become law, it would have to pass the Republican-controlled House of Representatives and then be signed by U.S. President Barack Obama. House of Representatives Speaker John Boehner recently said that the bill is dangerous and could spark a trade war, indicating that even if the Senate passed the bill, he might not bring it up for a vote in the House of Representatives. Obama, who has the power to veto the bill, also expressed worries that it could violate the rules of the World Trade Organization and is unlikely to obtain the support of the organization. 

However, those who have accused China have not shied away from the topic of a "trade war." Charles Schumer and Sherrod Brown, Democratic senators and co-sponsors of the bill, both said, "We are in a trade war." Brown added, "Today we are fighting back" and the United States has ended "the unilateral disarmament approach we have taken for the past decade."

In fact, U.S. senators, who have scores of advisors and assistants, are unlikely to forget history. The reason behind the hype of a "trade war," populist opinions and the policy proposals that harm both China and the United States mainly lies in the needs of the presidential election in 2012. 

In a political system with two parities taking turns to run the government, lawmakers in Congress tend to pay more attention to the interests of their own electoral districts and the votes of the individuals than the evaluation of the advantages and disadvantages from the angle of the entire country and the world. Generally, senators have a wider world vision than the House members because they are from bigger electoral districts and serve a longer term. 

Like the Smoot-Hawley Tariff of 1930, which deepened the Great Depression, congressmen from both of the parties should "do something to ease the concerns" of the voters about serious domestic unemployment and rising public discontent. Carl Weinberg, chief economist at High Frequency Economics said, "For U.S. politicians, it is simpler to blame and impose sanctions on China, and, anyways, the Chinese people do not vote in U.S. elections." 

Since the "Occupy Wall Street" movement shows no signs of ending, some U.S. election experts have put forward "tips" for some Democratic Party members seeking to be elected as congressmen in 2012: first, never defend Washington. Second, adopt a tough stance in terms of job creation. In addition to supporting costly infrastructure construction, they will also play some "free hoaxes" such as "currency manipulation by China" bill in order to appear to be "tough" in terms of increasing job opportunities.

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