Chesterton Tribune                                                                                   Adv.

USW to Administration: Keep pressure on undervalued Chinese currency

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The United Steelworkers (USW) is calling a U.S. Treasury report released on Thursday and designating the Chinese currency as undervalued “a small step in the right direction.”

According to a statement released on Friday by the USW, the undervalued yuan, also called renminbi, “artificially depresses the cost of Chinese products and falsely increases the price of American goods. The resulting lopsided trade has closed American factories and cost American jobs.”

“The administration is correct in calling the renminbi undervalued,” USW International President Leo Gerard said. “The next crucial step is to do something about it.”

The USW supports legislation that would punish China for currency manipulation.

“China undervalues its currency by using renminbi to buy dollars,” the statement said. “China now holds $2.4 trillion in U.S. currency. Even conservative economists agree that the renminbi is undervalued as a result by between 25 and 40 percent against the dollar.”

“As a result, U.S. products sold in China are as much as 40 percent overpriced,” the statement said. “And Chinese companies benefit because their products are artificially discounted by as much as 40 percent when sold in the U.S. That price break for Chinese companies has enabled them to sell products so cheaply in the U.S. that efficient and productive American firms, including paper and steel pipe manufacturers, fall victim to the distorted market and are forced to close. The currency manipulation also swells the U.S. trade deficit with China, making the U.S. increasingly indebted to the Asian country.”

“In 1960, before the U.S. opened trade with China, manufacturing accounted for a quarter of the U.S. gross domestic product (GDP) and employed 26 percent of the labor force,” the statement added. “Now, after giving China most favored nation trade status and a series of counterproductive trade deals including NAFTA, U.S. manufacturing is 11 percent of GDP and accounts for under 10 percent of total employment. More than 2 million factory workers have lost their jobs in the past three years.”

“President Obama’s goal of doubling exports within five years will be impossible to meet if illegitimately undervalued Chinese currency continues to force American manufacturers out of business,” Gerard said.

Under pressure from the U.S. to allow its currency to be valued naturally on international markets, China announced June 19 that it would establish a more flexible exchange rate policy. Since then, however, the renminbi has appreciated less than 1 percent against the dollar. “When you consider that it’s undervalued by as much as 40 percent, that one percent is meaningless,” Gerard said.

The Treasury Department report this week described China’s June announcement that it would permit the renminbi to float up on international markets as a “significant development” that the U.S. would closely and regularly monitor.

“If China prevents the value of the renminbi from appreciating dramatically against the dollar before the next Treasury report on currency is due Oct. 15, then Treasury must name China as a currency manipulator and take the next steps that are crucial to balance the currency and preserve American manufacturing,” Gerard said.

The USW is the largest industrial union in North American, representing 850,000 workers in metals, rubber, chemicals, paper, oil, atomic energy, forestry and other industries in North America.

 

 

Posted 7/12/2010

 

 

 

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