[Congressional Record Volume 157, Number 148 (Wednesday, October 5, 2011)]
[House]
[Pages H6563-H6564]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
HOLDING CHINA TO ACCOUNT
The SPEAKER pro tempore. The Chair recognizes the gentleman from
Massachusetts (Mr. Frank) for 5 minutes.
Mr. FRANK of Massachusetts. Madam Speaker, I want to quote from a
column earlier this week written by Paul Krugman, who does an
extraordinarily good job of presenting the case for a change in our
economic policies to deal with the unemployment that plagues not just
us, but others in the world.
The column is headlined ``Holding China to Account.'' And he begins:
``The dire state of the world economy reflects destructive actions on
the part of many players. Still, the fact that so many have behaved
badly shouldn't stop us from holding individual bad actors to
account.'' And that's what Senate leaders will be doing this week--they
did it already, they've begun the process--as they take up legislation
that would threaten sanction against China and other currency
manipulators.
Respectable opinion is aghast, but respectable opinion has been
consistently wrong lately, and the currency issue is no exception.
China has an enormous trade surplus with the United States, and a
significant part of that is due to their conscious intervention to
undervalue their currency. Now, that comes, to some extent, at the
expense of some in China in terms of the cost of living. On the other
hand, it provides employment.
There are of course other ways in which China interferes with the
free trade to which they supposedly adhered when they were allowed to
join the WTO, a move I voted against. They are manipulating the rare-
earth situation, restricting exports illegitimately to force companies
to come there. We recently had a situation where General Motors was
told that they wouldn't be allowed to sell their electric car in China
unless they gave up their technology--again, a blatant violation.
So we should be more aggressive in general. But particularly on the
currency issue, the manipulation by the Chinese is quite clear. As Mr.
Krugman points out: ``To get our trade deficit down, we need to make
American products more competitive, which in practice means that we
need the dollar's value to fall in terms of other currencies . . . but
sensible policymakers have long known that sometimes a weaker currency
means a stronger economy, and have acted on that knowledge.
``The United States can't and shouldn't be equally aggressive to
Switzerland. But given our economy's desperate need for more jobs, a
weaker dollar is very much in our national interest--and we can and
should take action against countries that are keeping their currencies
undervalued, and thereby standing in the way of a much needed decline
in our trade deficit. That, above all, means China.''
Now, I am very pleased to say, as Mr. Krugman notes, that the Senate
is moving ahead on this, and a bipartisan majority in the Senate is
voting for this bill. I was disappointed to see the Republican
leadership in this body announce that they won't take the bill up. It
is extraordinary to me that the Republican leadership of this body
apparently plans to go to the defense of the Chinese economy by not
allowing a bill that got bipartisan support in the Senate to allow us
to respond to Chinese unfair manipulation of their currency.
Now, there is one argument against it, which is, well, we'd better be
careful, we might make them angry. They might retaliate. How do they
retaliate beyond what they're doing? The Chinese are in violation in
area after area of the very free-trade rules to which they said they
were there.
There is this view that goes around in this country that almost
everybody in the world is doing us a favor by letting us be nice to
them. The notion that we somehow will anger China ignores the way the
Chinese are now behaving, and it ignores the economics. China has much
more to lose in a dispute with the United States economically than we
do. They have this enormous trade surplus with us. They buy American
debt, it is true, not as a favor to us, but because that's the safest
place to put their debt. If they had a better place to put it, they
would put it somewhere else. This is no favor to us.
I am for an American role of cooperation with the world. I wish we
would do more to alleviate hunger, to fight illness in poor countries.
I am very much in favor of our continuing to work with the multilateral
organizations, but this notion that we should not stand up for our own
legitimate economic interests against a nation like China--which is so
abusive of the process--because they might get mad at us is simply a
total misreading of the situation.
So I ask that Mr. Krugman's column, documenting the case for the
Senate legislation that directs our administration to take action
against Chinese currency manipulation, be put in the Record.
And I want America to be cooperative with the rest of the world. I
want us to share our wealth in ways that will help people who are
desperately poor. But this notion--and it really comes down to this--
that we have somehow taken on this geopolitical role, where we are the
guarantors of stability everywhere in the world and therefore we should
not be too aggressive in our own interests because we might--we should
not ever be putting the legitimate economic needs of our citizens above
geopolitical interests, that is wrong; and Mr. Krugman documents it.
[From the New York Times, Oct. 2, 2011]
Holding China to Account
(By Paul Krugman)
The dire state of the world economy reflects destructive
actions on the part of many players. Still, the fact that so
many have behaved badly shouldn't stop us from holding
individual bad actors to account.
And that's what Senate leaders will be doing this week, as
they take up legislation that would threaten sanctions
against China and other currency manipulators.
Respectable opinion is aghast. But respectable opinion has
been consistently wrong lately, and the currency issue is no
exception.
Ask yourself: Why is it so hard to restore full employment?
It's true that the housing bubble has popped, and consumers
are saving more than they did a few years ago. But once upon
a time America was able to achieve full employment without a
housing bubble and with savings rates even higher than we
have now. What changed?
The answer is that we used to run much smaller trade
deficits. A return to economic health would look much more
achievable if we weren't spending $500 billion more each year
on imported goods and services than foreigners spent on our
exports.
To get our trade deficit down, however, we need to make
American products more competitive, which in practice means
that we need the dollar's value to fall in terms of other
currencies. Yes, some people will shriek about ``debasing''
the dollar. But sensible policy makers have long known that
sometimes a weaker currency means a stronger economy, and
have acted on that knowledge. Switzerland, for example, has
intervened massively to keep the franc from getting too
strong against the euro. Israel has intervened even more
forcefully to weaken the shekel.
The United States, given its special global role, can't and
shouldn't be equally aggressive. But given our economy's
desperate need for more jobs, a weaker dollar is very much in
our national interest--and we can and should take action
against countries that are keeping their currencies
undervalued, and thereby standing in the way of a much-needed
decline in our trade deficit.
That, above all, means China. And none of the arguments
against holding China accountable can stand serious scrutiny.
Some observers question whether we really know that China's
currency is undervalued. But they're kidding, right? The flip
side of
[[Page H6564]]
the manipulation that keeps China's currency undervalued is
the accumulation of dollar reserves--and those reserves now
amount to a cool $3.2 trillion.
Others warn of bad consequences if the Chinese stop buying
United States bonds. But our problem right now is precisely
that too many people want to park their money in American
debt instead of buying goods and services--which is why the
interest rate on long-term U.S. bonds is only 2 percent.
Yet another objection is the claim that Chinese products
don't really compete with U.S.-produced goods. The rebuttal
is fairly technical; let me just say that those making this
argument both overstate the case and fail to take the
indirect effects of Chinese currency policy into account.
In the last few days a new objection to action on the China
issue has surfaced: right-wing pressure groups, notably the
influential Club for Growth, oppose tariffs on Chinese goods
because, you guessed it, they're a form of taxation--and we
must never, ever raise taxes under any circumstances. All I
can say is that Democrats should welcome this demonstration
that antitax fanaticism has reached the point where it trumps
standing up for our national interests.
To be fair, there are some arguments against action on
China that would carry some weight if the times were
different. One is the undoubted fact that inflation in China,
which is raising labor costs in particular, is gradually
eliminating that nation's currency undervaluation. The
operative word, however, is ``gradually'': something that
brings the United States trade deficit down over four or five
years isn't good enough when unemployment is at disastrous
levels right now.
And the reality of the unemployment disaster is also my
answer to those who warn that getting tough with China might
unleash a trade war or damage world commercial diplomacy.
Those are real risks, although I think they're exaggerated.
But they need to be set against the fact--not the mere
possibility--that high unemployment is inflicting tremendous
cumulative damage as we speak.
Ben Bernanke, the chairman of the Federal Reserve, said it
clearly last week: unemployment is a ``national crisis,''
with so many workers now among the long-term unemployed that
the economy is at risk of suffering long-run as well as
short-run damage.
And we can't afford to neglect any important means of
alleviating that national crisis. Holding China accountable
won't solve our economic problems on its own, but it can
contribute to a solution--and it's an action that's long
overdue.
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