Scott Paul, the Executive Director of the Alliance for American Manufacturing is one of the most loud mouthed lobbyists in Washington . He is willing to speak out on any subject, apparently based on the idea that everything that affects industry in the US should be managed based on his biases. He is remarkably partisan, but aligns himself only with the political party that views things his way. In other words, his convictions are short-lived, and malleable. This is often the case with people who have spent too may years lobbying for others.
Paul’s most recent knee-jerk reaction was to insist that Congress pass a law to “deter China’s currency manipulation”. He pushed for this because the Administration–the Treasury Department in particular–did not name China as a currency manipulator in its semi-annual report to Congress (“Semi-Annual Report to Congress on International Economic and Exchange Rate Policies”) on the matter. Paul’s direct reaction was “We’re deeply disappointed by the Treasury Department’s decision not to name China as a currency manipulator. America’s businesses and their workers depend on a level playing field to successfully compete, and they can’t halt unfair trade practices on their own.” Perhaps Paul thinks a trade war would solve the problem.
If China were to receive the “currency manipulator” tag, several things would happen immediately. Most of them would not be good for America. China could stop its purchase of US sovereign debt. China is such a large buyer that the federal government would almost certainly have to raise rates to increase demand from other sources. Since many other rates used to charge consumers and businesses are pegged from federal rates, the American economy would be damaged by a rise in the cost of capital. Some economists believe that China would not hurt the value of its own currency reserves by taking this path, but this assumes that all political decisions are rational.
The “currency manipulation” tag would begin a series of sanctions between the US and China. The People’s Republic rarely takes aggressive actions towards its economy quietly. China could effectively put tariffs on US goods which might be so high that some American businesses would be severely damaged. The imports from China which America needs to keep the cost of living reasonable would in large numbers disappear. Wal-Mart’s “every day low prices” would be gone in a day. So would millions of goods built in China for export to the US. The by-products of Mr. Paul’s suggestion, if taken, would do incalculable damage to the American economy, and put a number of the workers at the companies that support the Alliance for American Manufacturing out of jobs. Perhaps those companies should pause to reconsider whether they benefit from what Paul has said.
The Administration knows full well that the China currency issue is a problem. In its report, Treasury said that China’s currency remains “significantly undervalued” and “further appreciation of the yuan against the dollar and other major currencies is warranted.” It is unfortunate that the US cannot immediately force China’s hand. But, China has a strong hand, too
Douglas A. McIntyre