WASHINGTON — Sen. Daniel Inouye says Congress should keep out of discussions with China over how it undervalues its currency to gain a trade advantage with the United States.

Inouye’s position represents a rare instance in which the Democrat is siding with Republican House Speaker John Boehner. Both Inouye and Boehner on Tuesday voiced opposition to a bill that would impose trade penalties on China.

“This issue is now being carefully and effectively carried out by the appropriate agencies,” Inouye told Civil Beat in an interview Tuesday. “They’ve been discussing this matter. You know, you can pass resolutions around here condemning somebody, and you just anger them.”

The Senate advanced the Currency Exchange Rate Oversight Reform Act of 2011 in a 79-19 vote on Monday evening.1

Economists estimate that the Chinese yuan is undervalued by about 30 percent. The practice artificially lowers the cost of exporting Chinese goods and puts American competitors at a disadvantage.

But Inouye argues that the outcome would be worse if Congress angers the Chinese. Indeed, Chinese officials reacted swiftly against the Senate vote on Monday. Inouye said the situation is of particular concern for Hawaii.

“I’ll be honest with you, the Chinese are now an important element in our tourism business,” Inouye said. “Their numbers are increasing.”

Currency Disadvantage Threatens Recovery

Others in Washington, including Federal Reserve Chairman Ben Bernanke, have argued that currency manipulation is slowing the speed of the U.S. economic recovery.

A hampered national recovery may pose another concern for Hawaii tourism. As one University of Hawaii economist put it in an interview with Civil Beat last month, the strength of Hawaii’s leading industry depends heavily on the rest of the country’s financial optimism.

Leading Democrats like Senate Majority Leader Harry Reid call China’s handling of its currency an “unfair” tactic that costs American jobs.

“In 1990, America’s trade deficit with China was $10 billion,” Reid said on the Senate Floor on Tuesday, according to his prepared remarks. “Twenty years later, thanks to currency manipulation that gives an edge to Chinese exporters, that trade deficit had soared to $273 billion. That trade deficit has fueled the loss of nearly 3 million American jobs, including 2 million manufacturing jobs, in the last decade alone.”

A researcher with the Peterson Institute for International Economics, a nonprofit international economic research institution, estimated that eliminating the currency “misalignment” would generate more than 1 million jobs in the United States.

Inouye said he has “no idea” how such an estimate was made. The bottom line, Inouye said, is that Congress should stay out of negotiations about how China handles its currency.

“It’s an effort to send a message and there are many ways of sending messages,” Inouye told Civil Beat. “An effective way to send a message but it may have a negative result, not something you want.”

Inouye said he has been told that the House “will not touch” the bill. The Obama administration appears to be similarly wary about how Congress proceeds.

“We share the concern of members about the valuation of the Chinese currency and the need to appreciate the value of the Chinese currency,” White House Press Secretary Jay Carney told reporters aboard Air Force One on Tuesday, according to a transcript. “We also are concerned that any action that might be taken would be effective and consistent with our international obligations.”

Follow Civil Beat on Facebook and Twitter. You can also sign up for Civil Beat’s free daily newsletter.

About the Author

Comments