CNN Lou Dobbs Tonight - Transcript
Monday, July 25, 2005
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DOBBS: Last week, China agreed to revalue its currency, and to move toward a more flexible exchange rate. It's likely that we won't know for some time whether it's genuine reform or something closer to window dressing.
My guest tonight is Senator Lindsey Graham. He co-sponsored legislation that would impose high tariffs unless China significantly revalues its currency.
Senator Lindsey Graham, is this really reform on the part of the Chinese or is it window dressing?
SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: I think the jury's still out. For two and a half years, Senator Chuck Schumer, my partner in all of this from New York, we've been working together to try to press the Chinese to float their currency.
They have it pegged at the dollar in a way that creates an advantage for all Chinese-produced products. They intentionally undervalue their currency. Cheap currency means cheap products.
They made a move of 2.4 percent. The estimate is that their currency's 15 percent to 40 percent undervalued, so obviously 2.4 percent is not even close.
But within their decision to move away from pegging to the dollar, they've allowed a process, Lou, of where they can revalue every day 0.3 percent. They've yet to use that since last week. But if they continue to move toward a revaluation, it would be real reform. If it's 2.4 percent, it's nothing.
DOBBS: Like you, and like most Americans, I'm hopeful that this means that there will be a true floating exchange rate. It certainly is not that. They're limiting the band to 0.3 percent as you point out. We're looking at the most modest of beginnings, but it is a beginning.
Let's turn to the other issue. I asked Treasury Secretary John Snow just last week -- giving kudos both to you and Senator Schumer for your legislation; it was obviously a significant impetus here and to the administration. But the fact is, my question is simple that I asked him -- I will ask you the same simple question -- what U.S. exports to China will benefit as a result of a revaluation of the yuan, even if it were significant?
GRAHAM: That really won't affect the exports to China. But what it will do is affect the American manufacturing in a positive way, because other Asian nations will begin to revalue their currency. They will follow China's lead. The higher the value of the yuan, the more its true value.
The discount built into their products is gone, but it has a ripple effect to help American manufacturing. In isolation, it will do nothing. But if other Asian nations follow, it could be a real big benefit to American manufacturing internationally.
DOBBS: Senator, I've been accused by some who are completely ignorant and foolish beyond words, calling me a protectionist because I want to see reciprocity and mutuality in a trade relationship.
GRAHAM: That's what this is about, my friend.
DOBBS: My great concern here is that the manufacturing base in the United States has been diminished to such a point that we cannot take advantage of the opportunity here to drive U.S. exports. I mean, our leading surpluses right now, as you know, and the relationship with China, the trade relationship, we're shipping scrap metal and soybeans. GRAHAM: Right. We're down to two items. And the bottom line is that by pegging their currency, they've created a discount on all products made in China beyond the cheap labor factor.
And if we sit on the sidelines and let them keep manipulating the currency, nobody's going to be able to compete with China, and people will follow their reforms.
But American manufacturing is holding on by a thread. It is now time for Congress to fight for a more level playing field here at home and abroad.
And I think this is the first significant step since I've been here in 10 years, Lou, for the Chinese to come our way a little bit, and it only comes from pressure. If we'll be united, the Congress and the White House, united in getting them to play fair, down the road, it will pay dividends.
DOBBS: Senator Lindsey Graham, we thank you for being here...
GRAHAM: Thank you.
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