WASHINGTON, D.C., April 9 – The nearly 2,000 domestic companies comprising the U.S. Business and Industry Council (USBIC) today warned the Obama administration that settling for a token yuan revaluation would betray U.S. domestic companies and their employees victimized by China's currency manipulation.  

The Council added that the widely expected small rise in the yuan's value would be grossly inadequate to encourage the kind of production- and earnings-led recovery that would create sustainable jobs, restore genuine health to the U.S. economy, and bring under control still- dangerously large global financial imbalances.

The Council urged President Obama immediately to impose stiff offsetting tariffs on U.S. imports from China and other countries that manipulate their currencies.  And it called for prompt Congressional passage of the Schumer-Graham bill, which would accomplish the same goal, as well as the bipartisan House and Senate bills that would enable injured U.S. industries to file anti-subsidy suits in the U.S. trade law system against currency manipulators.

Said USBIC President Kevin L. Kearns, "Chinese currency manipulation has damaged the U.S. and other national economies since the mid-1990s, and deserves considerable blame for the global economic and financial crisis.  Even major economists who long ignored the problem now agree that the yuan is undervalued by up to 40 percent."  

Continued Kearns, "Domestic U.S. manufacturers and their employees have been priced out of global markets for years by Beijing's flagrant exchange-rate protectionism.  They need and deserve full relief immediately.  An Obama decision to accept token China currency moves now, and even a gradual follow-on yuan appreciation, would betray these highly competitive American producers, and trigger more bankruptcies and job losses."

Kearns added, "Playing the currency tokenism game will also further delay genuine U.S. recovery.  It will allow continued Chinese theft of the new orders desperately needed by domestic businesses to create real, earnings-led growth for the entire American economy.  Moreover, accepting a modest yuan revaluation will ensure that beggar-thy-neighbor Chinese policies keep the world economy dangerously unbalanced and crisis-prone."

According to Kearns, stand-patters who portray the temporarily loosened peg as evidence of Beijing's benign intentions are looking at the wrong figures.  True, China allowed the yuan to rise by roughly 20 percent versus the dollar from July, 2005, to July, 2008.  But that nominal move erased at most half of a real undervaluation rate even then estimated at between 25 and 40 percent.  More important, since 2005, China's current account surpluses have exploded and its finances have strengthened tremendously.  As a result, the yuan's nominal exchange rate has become far less reflective of China's economic fundamentals, and the real degree of undervaluation has clearly increased.

In addition, Kearns observed, "President Obama's feckless response to China's currency manipulation has enabled China to call the shots on this vitally important issue. Settling for a token revaluation would only reenforce a dangerous policy of increasing China's influence over American economic growth and employment rates."  Imposing anti-manipulation tariffs, he said, would return the policy initiative to the United States, where it belongs

Kearns also rejected arguments for delaying U.S. currency decisions until after Chinese President Hu Jintao's upcoming visit to Washington for an arms control conference.  "America already has the military forces and defense policies needed to handle any security threats posed by China.  What we now urgently need is the will to handle the growing economic threats posed by China."

In addition, Kearns recommended that Congress take up broader measures to rebalance U.S. and worldwide trade flows and thereby create a solid foundation for global growth – in particular, the Balanced Trade Act introduced by Maine Democratic Congressman Michael Michaud in 2006, and the 2007 Border Tax Equity Act, cosponsored by Michaud, New Jersey Democrat Bill Pascrell, and others, which offsets the massive trade effects of discriminatory foreign value-added tax systems.    

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