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China’s Currency Manipulation: Flipping Off America

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Leo GerardChina is disrespecting America.

The Asian giant is an international trade outlaw, and U.S. manufacturers and workers are its crime victims.

China illegally subsidizes its export industries and unlawfully manipulates its currency. That kills U.S. industry and destroys U.S. jobs. Earlier this year, the Obama administration asked China nicely to allow its currency value to float up naturally on international markets. On June 19, China said it would.

And then it didn’t.

That’s flipping the bird at America.

Before China’s June 19 promise, bipartisan groups of lawmakers in the U.S. House and Senate proposed legislation that would force the U.S. Treasury Department to even the score and to call China out for what it is: a currency manipulator. Hearings on the bills are being conducted this week.

Pass the legislation. It’s time for America to flip the bird back.

Negotiation and threats have failed to produce a sustained, substantial currency float by China. Now, the Chinese currency, the renminbi, is undervalued by as much as 40 percent, a figure accepted by conservatives like C. Fred Bergsten of the Peterson Institute for International Economics. Even the International Monetary Fund managing director said the currency is undervalued.

China simply denied it. In March, the Chinese premier, Wen Jiabao, said he did not believe the renminbi was undervalued. That’s flipping off the world.

It works like this: China prints renminbi to buy billions of U.S. dollars, which makes them appear more desired and valuable, and the renminbi, by contrast, less valuable. That undervaluation of the renminbi acts as a subsidy for Chinese exports, artificially making them as much as 40 percent cheaper when sold in the U.S. Conversely, it acts as a tax of as much as 40 percent on American-made goods sold in China.

This dynamic contributed significantly to the rise of manufacturing in China. Earlier this year, China surged past Japan to become the world’s second-largest economy. And it contributes significantly to America’s massive trade deficit. The gap in July was $42.8 billion, more than half of which — $25.9 billion — was a result of trade with one country – China.

China’s rapid economic growth has ended poverty for millions of its workers.  Here in the United States, however, China’s flouting of international trade law is destroying the lives of millions of workers. The Economic Policy Institute estimates that 2.4 million American jobs have been lost or displaced since 2001 as a result of the trade deficit with China. American workers celebrate their Chinese counterparts’ improved quality of life, but they condemn the government of China for accomplishing that with beggar-thy-neighbor trade practices.

Earlier this year, it briefly looked like threats would prompt China to act. In March, a bipartisan coalition of U.S. Senators introduced legislation specifying the factors necessary to label a country as a currency manipulator and detailing American reprisals. And in April, the Treasury Department delayed its report identifying countries that manipulate currency rates, suggesting that it was ready to take on China.

China appeared to respond to that pressure in June. It announced it would allow the renminbi to float toward its real value on the open market. The Treasury Department backed off, omitting China from its list of currency manipulators in July.

China then permitted the value of the renminbi to rise less than one percent. One percent. When it’s as much as 40 percent undervalued. That’s flipping the bird at America. Big time.

Still, America didn’t react.

On Aug. 25, the Commerce Department announced 14 new measures to crack down on trade violations, such as ending certain exemptions from duties.

It did not, however, mention currency manipulation.

Dan DiMicco, CEO at Nucor Corp., the largest U.S. steelmaker, said the 14 measures are important, but the problem with China won’t be resolved until the United States takes on currency undervaluation. Here’s what he said:

“As long as we continue to let them get away with it, they’ll keep doing it.”

Six days later, in a trade case filed by the U.S. Aluminum Extrusions Fair Trade Committee, a coalition of domestic manufacturers of aluminum extrusions and the USW, the Commerce Department again squirmed out of dealing with currency manipulation.

Commerce imposed import duties on Chinese aluminum companies because China unfairly subsidized $514 million in aluminum exports to the U.S. in 2009. But Commerce refused to investigate the Fair Trade Committee’s evidence that China’s currency manipulation functions as an additional illegal export subsidy.

Sen. Chuck Schumer of New York, a sponsor of currency manipulation legislation, said afterward:

“The Commerce Department made its finding while still managing to ignore the elephant in the room, which is China’s currency manipulation.”

Commerce and Treasury have decided the proper response to China flipping off America is averting their eyes.  See no evil.

Yesterday Japan followed China’s lead. It bought dollars and sold yen, decreasing the value of yen and increasing the value of dollars. This, the New York Times explained, was “a bid to protect its export-led economy.” That’s exactly what China is doing.

It’s a very public show of contempt for international regulations and for American citizens.

Normally, Americans don’t respond passively to contempt. Be normal, America.

About The Author: Leo Gerard is the United Steelworkers International President. Under his leadership, the USW joined with Unite -the biggest union in the UK and Republic of Ireland – to create Workers Uniting, the first global union. He has also helped pass legislation, including the landmark Canadian Westray Bill, making corporations criminally liable when they kill or seriously injure their employees or members of the public.


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Today Is World Day for Decent Work

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Today is World Day for Decent Work, and union members in more than 100 countries are mobilizing to address the global economic and employment crisis and demand fundamental reform of the world economy.

The deepest global recession since the 1930s has led to a jobs crisis with millions of people out of work. The International Labor Organization (ILO) predicts that as many as 50 million more workers could be kicked out of jobs worldwide in the next year and could lead to a dramatic increase in the number of working poor.

Live online coverage of the activities around the world, including videos, photographs and messages from events in every continent, will be broadcast on a special website, www.wddw.org, which will be updated via a 24-hour live feed.

At its recent convention, the AFL-CIO strongly underscored its support for decent work for workers in the United States and around the world by unanimously passing a major resolution, “A Labor Movement Agenda for a Stronger, Cleaner and More Just Global Economy.” The resolution stressed the need for the global labor movement to promote the ILO’s Global Jobs Pact to help coordinate government efforts to respond to the employment crisis.

Following the convention, the newly elected AFL-CIO leadership traveled to meet with working families around the country, leading up to the G-20 meeting in Pittsburgh. At the G-20, AFL-CIO President Richard Trumka and International Trade Union Confederation (ITUC) General Secretary Guy Ryder, along with other international trade union leaders, met with President Obama. They stressed the elements of the June 2009 ILO “Jobs Pact” and the importance of enacting coordinated policies to create decent and environmentally sustainable work to combat growing unemployment, enact comprehensive and effective regulation of financial markets and promote the inclusion of key international labor standards in all assistance programs of the International Monetary Fund and World Bank.

The economic crisis is far from over and the global stimulus packages will not be enough to keep joblessness from growing at a steady pace, according to a new report by the ITUC. The report, “Jobs—The Path to Recovery,” was released to mark World Day for Decent Work. It shows that only 1.8 percent of financial rescue efforts have been dedicated directly to employment.

The report highlights trade union actions to fight the crisis around the world and explains the steps needed to achieve a decent work-led recovery and build a fairer and more sustainable world economy for future generations.

The G-20 summit, which ended recently in Pittsburgh, made progress in some areas but failed to completely address the overwhelming need to create new jobs now. “The current situation needs mending,” says Ryder:

Trade unions are raising their voices across the continents, to keep up the pressure for fundamental change, for justice and equity.

They face tremendous resistance from those who have profited from the exploitation of others in the past. Trade unions are determined to confront and defeat that resistance, and to ensure that governments everywhere get the message that they must deliver the results that working people demand.

Click here to read the full report, “The Path to Recovery: How Employment is Central to Ending the Global Crisis.”

Nowhere is the need for decent work more obvious than in the sweatshops of Asia, where workers toil long hours for little pay and few, if any, benefits to make apparel and other items for export that they could never afford to buy themselves.

Today, in New Delhi, India, and in cities in the United States, United Kingdom and throughout Europe, workers will launch a campaign for a living wage called the Asia Floor Wage.

In rallies, workshops, meetings with government and business leaders, public lectures by prominent human rights supporters and press conferences, they will promote a new strategy for global economic growth based on protecting workers’ rights and guaranteeing a living wage.

With so many of the world’s garments and other products being manufactured in Asia, corporations have exploited the workers there, forcing them to work long hours with little pay and few benefits. The campaign challenges this race-to-the-bottom by calling for raising the minimum wage in all major garment producing countries.

In the United States, Jobs with Justice is teaming up with the International Labor Rights Forum (ILRF), United Students Against Sweatshops (USAS), Worker Rights Consortium (WRC), the Asia Pacific American Labor Alliance (APALA) and the AFL-CIO for an educational campaign with our members and allies.

To learn more about the Asia Floor Wage campaign, click here.

About the Author James Parks had his first encounter with unions at Gannett’s newspaper in Cincinnati when his colleagues in the newsroom tried to organize a unit of The Newspaper Guild. He saw firsthand how companies pull out all the stops to prevent workers from forming a union. He is a journalist by trade, and worked for newspapers in five different states before joining the AFL-CIO staff in 1990. He has also been a seminary student, drug counselor, community organizer, event planner, adjunct college professor and county bureaucrat. His proudest career moment, though, was when he served, along with other union members and staff, as an official observer for South Africa’s first multiracial elections.

This article originally appeared in the AFL-CIO blog on October 7, 2009. Re-printed with permission by the author.


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