Sen. Charles E. Schumer and his colleagues have had just about enough from China and its proclivity to devalue its currency, making imports and exports that much more expensive for this and other countries. In that, the senators are absolutely correct.
With unemployment at 10 percent and its currency policies skewing trade balances, there is more than enough reason to place pressure on China, as the senators sought to do the other day when a bipartisan group of 14 announced new legislation to "vigorously" address currency misalignments that unfairly and negatively impact U.S. trade.
Whatever reason the Obama and previous administrations have had to be hesitant about getting tough, this country's approach should be re-evaluated and a workable strategy adopted to address the situation, starting with Treasury policy that maintains a tough stance even though labeling China as a currency manipulator would have serious cascading diplomatic effects.
Alongside those steps, the United States should engage in multilateral efforts involving other affected countries, with the International Monetary Fund acting as the objective party in determining whether China has acted unfairly. Meanwhile, the lawmakers focused on this problem should continue to push.
Legislation introduced by Schumer and his colleagues -- including Sen. Kirsten Gillibrand, also a New York Democrat -- would provide less flexibility to the Treasury Department on the issue of citing countries for currency manipulation and impose stiff new penalties on designated countries, including tariffs on the countries' exports and a ban on any companies from those countries receiving U.S. government contracts.
The groundwork is being laid in the face of defiance by China Prime Minister Wen Jiabao, who reportedly rejected complaints as "a kind of trade protectionism."
Currency manipulation, as the senators assert, offers China's industries an unfair advantage over U.S. manufacturers by effectively lowering the price of their exports as compared to domestic goods. It also imposes a cost on U.S. exports, making American goods sold abroad more expensive. All of this creates an unfair trade advantage and contributes significantly to the U.S. trade imbalance.
This is not a new complaint by Schumer and his colleagues. He and Sen. Lindsey Graham, R-S.C., were knocking at China's door in 2005 with a similar measure that passed the Senate with 67 votes before coming to a standstill in the House. But this is a new and more economically damaged day; more manufacturing jobs in this country have been lost and unemployment has crept higher and higher. The recent passage of the jobs bill should offer a strong indication of American sentiment.
Pressuring China may not work and, in the end, may prove a diplomatic problem. But the artificial devaluing of currency to gain economic advantage already is causing harm, and this issue must be addressed.