Senator Chuck Schumer of New York is one of the champions of legislation to force China to consider how it values the yuan. Schumer sides with economists who say that China’s currency manipulation has cost Americans millions of jobs. Schumer’s plan may help set a trade war between the world’s two largest economies if he presses for passage of such a bill.
Schumer recently asked his fellow members of Congress to rally around his plan. “This strong bipartisan legislation is a clear, unwavering message from both parties to China’s leaders — the jig is up, it’s time to stop gaming the system or face severe consequences. China’s history of half-truths and broken promises on currency makes passing this legislation an economic imperative. I hope both parties will come together to pass this bill next week.”
A number of constitutional experts believe that Schumer’s approach cannot become law, or the courts will overturn it if it does. His plan would take away powers that belong to the Treasury Department, which sends a report of unfair trade practices to Congress twice a year. So far Secretary Geithner has dodged the problem of manipulation because he believes that quiet negotiation is preferable to what he sees as bullying by Schumer and his colleagues.
Schumer’s position will be helped by intransigent unemployment and the need for members of Congress to show their constituents that they have done something about it. Employment will be the most important issue in the 2012 elections. Congress members viewed by voters as taking the wrong side of the issue risk their jobs.
Chinese media has recently run a number of comments from national officials saying that it is the U.S.’s lack of competitiveness and the inability of American companies to bring down costs that are at the heart of trade and manufacturing problems here. The value of the renminbi, they claim, has nothing to do with U.S. unemployment problems.
Congress has made halting attempts to press the Administration to label China as a currency manipulator. Such an action would cause America to set sanctions on goods sent from the People’s Republic to the U.S. China would retaliate and probably block U.S. exports to the world’s most populous nation.
The bill set to press China to revalue its currency has real momentum now as the next national election is only 14 months away. This makes a large trade dispute with the People’s Republic much more likely than it has been in the past.
Douglas A. McIntyre