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Holding China to Account

Floor Speech

By:
Date:
Location: Washington, DC

Mr. FRANK of Massachusetts. Madam Speaker, I want to quote from a column earlier this week written by Paul Krugman, who does an extraordinarily good job of presenting the case for a change in our economic policies to deal with the unemployment that plagues not just us, but others in the world.

The column is headlined ``Holding China to Account.'' And he begins: ``The dire state of the world economy reflects destructive actions on the part of many players. Still, the fact that so many have behaved badly shouldn't stop us from holding individual bad actors to account.'' And that's what Senate leaders will be doing this week--they did it already, they've begun the process--as they take up legislation that would threaten sanction against China and other currency manipulators.

Respectable opinion is aghast, but respectable opinion has been consistently wrong lately, and the currency issue is no exception.

China has an enormous trade surplus with the United States, and a significant part of that is due to their conscious intervention to undervalue their currency. Now, that comes, to some extent, at the expense of some in China in terms of the cost of living. On the other hand, it provides employment.

There are of course other ways in which China interferes with the free trade to which they supposedly adhered when they were allowed to join the WTO, a move I voted against. They are manipulating the rare-earth situation, restricting exports illegitimately to force companies to come there. We recently had a situation where General Motors was told that they wouldn't be allowed to sell their electric car in China unless they gave up their technology--again, a blatant violation.

So we should be more aggressive in general. But particularly on the currency issue, the manipulation by the Chinese is quite clear. As Mr. Krugman points out: ``To get our trade deficit down, we need to make American products more competitive, which in practice means that we need the dollar's value to fall in terms of other currencies ..... but sensible policymakers have long known that sometimes a weaker currency means a stronger economy, and have acted on that knowledge.

``The United States can't and shouldn't be equally aggressive to Switzerland. But given our economy's desperate need for more jobs, a weaker dollar is very much in our national interest--and we can and should take action against countries that are keeping their currencies undervalued, and thereby standing in the way of a much needed decline in our trade deficit. That, above all, means China.''

Now, I am very pleased to say, as Mr. Krugman notes, that the Senate is moving ahead on this, and a bipartisan majority in the Senate is voting for this bill. I was disappointed to see the Republican leadership in this body announce that they won't take the bill up. It is extraordinary to me that the Republican leadership of this body apparently plans to go to the defense of the Chinese economy by not allowing a bill that got bipartisan support in the Senate to allow us to respond to Chinese unfair manipulation of their currency.

Now, there is one argument against it, which is, well, we'd better be careful, we might make them angry. They might retaliate. How do they retaliate beyond what they're doing? The Chinese are in violation in area after area of the very free-trade rules to which they said they were there.

There is this view that goes around in this country that almost everybody in the world is doing us a favor by letting us be nice to them. The notion that we somehow will anger China ignores the way the Chinese are now behaving, and it ignores the economics. China has much more to lose in a dispute with the United States economically than we do. They have this enormous trade surplus with us. They buy American debt, it is true, not as a favor to us, but because that's the safest place to put their debt. If they had a better place to put it, they would put it somewhere else. This is no favor to us.

I am for an American role of cooperation with the world. I wish we would do more to alleviate hunger, to fight illness in poor countries. I am very much in favor of our continuing to work with the multilateral organizations, but this notion that we should not stand up for our own legitimate economic interests against a nation like China--which is so abusive of the process--because they might get mad at us is simply a total misreading of the situation.

So I ask that Mr. Krugman's column, documenting the case for the Senate legislation that directs our administration to take action against Chinese currency manipulation, be put in the Record.

And I want America to be cooperative with the rest of the world. I want us to share our wealth in ways that will help people who are desperately poor. But this notion--and it really comes down to this--that we have somehow taken on this geopolitical role, where we are the guarantors of stability everywhere in the world and therefore we should not be too aggressive in our own interests because we might--we should not ever be putting the legitimate economic needs of our citizens above geopolitical interests, that is wrong; and Mr. Krugman documents it.

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