U.S. Sen. Sherrod Brown wants to re-introduce legislation that would create a level playing field for American manufacturing by eliminating currency manipulation by large trading partners like China.
Brown, in a conference call with reporters on Thursday, cited a new report from the Economic Policy Institute that cites trade deficit reduction as a key step for improving job growth in the United States. In addition to addressing currency manipulation, the report calls for “a series of coordinated manufacturing policies” on the federal level.
Spokespersons from both EPI and the Alliance for American Manufacturing participated in the conference call with Brown, who also called for prohibiting currency manipulation in future trade agreements.
Nations like China that purposely devalue their currency by selling it and buying foreign reserves, such as the U.S. dollar, thereby cheapen the price of the nation’s exports. In some cases, the cost of the finished product manufactured in China is less than that of the raw materials in the U.S. market.
The resulting trade deficit has contributed to the loss of 5 million U.S. manufacturing jobs since 2000. The trade deficit in 2011 was $295 billion and the deficit for 2012 is expected to be even larger.
The experts who spoke on the conference call blamed currency manipulation as the single largest cause of the trade deficit. They estimated that, in Ohio alone, 75,000 manufacturing jobs could be created if the inequality were addressed.
According to the AAM report, 2.2 million to 4.7 million new U.S. jobs would be created by eliminating currency manipulation by trading partners and establishing a national manufacturing strategy.
“This report shows that Congress is obsessed with the wrong deficit,” said AAM President Scott Paul in a news release. “To grow jobs and boost the economy, we must eliminate the trade deficit. Ending currency manipulation will get us part of the way there, but we also need a smart manufacturing policy, one that focuses on innovation, public investment, skills and trade enforcement.”
Brown said that the Senate’s prior effort to eliminate currency manipulation passed with 63 votes, but the House would not take up the measure. The senator said that the U.S. Chamber of Commerce resists the measure, as do large manufacturers, which benefit most from moving manufacturing offshore. Those companies can take advantage of the low cost of labor, more relaxed environmental regulations and the current devaluation to produce a less costly product.
The manufacturing industry spokesmen noted that a recent trend to move manufacturing back to the U.S. has not had a significant impact because components are still being made offshore. Only the assembly is being done domestically.
The EPI report states that the federal budget deficit would shrink if the trade deficit were reduced. The estimate is $78.8 billion to $165.8 billion as growth in output would expand tax receipts and reduce safety net payments.
The report is online at www.epi.org.
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