Labeling China's Currency Undervalued Correct; USW Calls for More Action

PITTSBURGH, June 9 /PRNewswire-USNewswire/ -- The U.S. Treasury report issued yesterday designating the Chinese currency as undervalued is a small step in the right direction.

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The undervalued yuan, also called renminbi, artificially depresses the cost of Chinese products and falsely increases the price of American goods. The resulting lopsided trade has closed American factories and cost American jobs.

"The administration is correct in calling the renminbi undervalued," said Leo W. Gerard, international president of the United Steelworkers (USW) union. "The next crucial step is to do something about it," he added. The USW supports legislation that would punish China for currency manipulation sponsored in the Senate by Sen. Chuck Schumer, D-N.Y., and others and in the House by U.S. Rep. Tim Ryan, D-Ohio, and others.

China undervalues its currency by using renminbi to buy dollars. China now holds $2.4 trillion in U.S. currency. Even conservative economists agree that the renminbi is undervalued by between 25 and 40 percent against the dollar.

As a result, U.S. products sold in China are as much as 40 percent overpriced. And Chinese companies benefit because their products are artificially discounted by as much as 40 percent when sold in the U.S. That price break for Chinese companies has enabled them to sell products so cheaply in the U.S. that efficient and productive American firms, including paper and steel pipe manufacturers, fall victim to the distorted market and are forced to close. The currency manipulation also swells the U.S. trade deficit with China, making the U.S. increasingly indebted to the Asian country.

In 1960, before the U.S. opened trade with China, manufacturing accounted for a quarter of the U.S. gross domestic product (GDP) and employed 26 percent of the labor force. Now, after giving China most favored nation trade status and a series of counterproductive trade deals including NAFTA, U.S. manufacturing is 11 percent of GDP and accounts for under 10 percent of total employment. More than 2 million factory workers have lost their jobs in the past three years.

"President Obama's goal of doubling exports within five years will be impossible to meet if illegitimately undervalued Chinese currency continues to force American manufacturers out of business," Gerard said.

Under pressure from the U.S. to allow its currency to be valued naturally on international markets, China announced June 19 that it would establish a more flexible exchange rate policy. Since then, however, the renminbi has appreciated less than 1 percent against the dollar. "When you consider that it's undervalued by as much as 40 percent, that one percent is meaningless," Gerard said.

The Treasury Department report this week described China's June announcement that it would permit the renminbi to float up on international markets as a "significant development" that the U.S.  would closely and regularly monitor.

"If China prevents the value of the renminbi from appreciating dramatically against the dollar before the next Treasury report on currency is due Oct. 15, then Treasury must name China as a currency manipulator and take the next steps that are crucial to balance the currency and preserve American manufacturing," Gerard said.

The USW is the largest industrial union in North American, representing 850,000 workers in metals, rubber, chemicals, paper, oil, atomic energy, forestry and other industries in North America.

CONTACT: Barbara White Stack of United Steelworkers (USW), +1-724-713-2821, [email protected]

SOURCE United Steelworkers (USW)