[Congressional Record (Bound Edition), Volume 157 (2011), Part 10]
[House]
[Pages 14826-14827]
[From the U.S. 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

[[Page 14827]]

     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 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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