If China's Currency Rose, Would U.S. Get Jobs Back?

There's a push in Congress to punish China for keeping its currency cheap. A bill, which has passed the House but not the Senate, would allow the U.S. to slap tariffs on Chinese goods. The goal is to force China to strengthen its currency. And that, in theory, would help American exporters. But many economists think the strategy wouldn't work and could backfire disastrously.

Copyright © 2010 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

STEVE INSKEEP, host:

China's government is expressing anger with the U.S. House of Representatives. The Chinese are upset because the House passed a bill that would allow the president to impose tariffs on Chinese exports if China does not stop interfering in exchange rates.

The currency exchange rates affect the price of Chinese goods in the U.S., and the price of American goods in China. It is now up to the Senate to vote on that bill.

Advocates of the bill, like House Speaker Nancy Pelosi, say it could help create American jobs - lots of them.

Representative NANCY PELOSI (Democrat, California): One million American jobs could be created if the Chinese government took its thumb off the scale and allowed its currency to respond to market forces.

INSKEEP: Adam Davidson of our NPR's Planet Money team looked into those numbers to see if the promises of the bill could be true.

ADAM DAVIDSON: Most economists who look at this think that if the Chinese government stopped messing around in the currency markets, the yuan would get stronger - it would be worth maybe about 20, 30, even 40 percent more, relative to the U.S. dollar. Basically, anything you buy from China will cost more because the U.S. dollar won't go as far.

So if China stopped manipulating its currency, would the U.S. suddenly get all those manufacturing jobs back? To answer this question, consider the humble industrial spring.

Ms. ROSEMARY COATES (Blue Silk Consulting): Those little springs that go in everything, like battery pack - that little spring in there when you put in the battery, that's an industrial spring, or in a pen.

DAVIDSON: Rosemary Coates, with Blue Silk Consulting, helps U.S. companies who are doing business with China. One of her clients used to buy those industrial springs in the U.S., at a factory in L.A. Then, he switched to China.

Ms. COATES: And he saved 95 percent of the costs. I mean, it was just unbelievable.

DAVIDSON: If a spring costs a dollar in the U.S., then it costs a nickel coming from China - shipping included. So even if China did rebalance its currency and suddenly the dollar didn't quite go so far in China, then this guy would have to pay 7 cents; maybe 9 cents for that spring. It's still way cheaper to buy it from China.

There's not going to be any spring factories opening back up in L.A. No new spring manufacturing jobs in the U.S.

Coates says lots of products - toys, T-shirts, socks, low-end electronics -they're so much cheaper in China that no reasonable amount of currency changes are going to make much of a difference.

Dr. TOM DUESTERBERG (Manufacturers Alliance): T-shirts, commodity-type items, are probably not coming back.

DAVIDSON: That's Tom Duesterberg, who runs the Manufacturers Alliance, a trade group that wants China to stop manipulating its currency. He says sure, America can't compete against China for low-end commodity goods.

Dr. DUESTERBERG: It's more interesting when you get into - like appliances, auto parts - you might see slight return of products like that.

DAVIDSON: Did you hear that word he used? Slight. Chinese-made auto parts and appliances, they're only 40 or 50 percent cheaper than American-made ones. It's not like that 95 percent discount you get on a spring. If you see a U.S.-made microwave for $100 and a Chinese-made one for 50, you're probably buying the one from China. But if the Chinese one is only 10 bucks cheaper than the U.S. one, maybe you'll buy American.

But as Wal-Mart can attest, no matter how much people say they want to buy American, they usually end up going with whatever's cheaper.

So no, Duesterberg says, no matter what Congress claims, this bill is not going to shepherd in a new renaissance for U.S. manufacturing - certainly not anytime soon. But it's still good for the U.S. if China adopts a more reasonable currency policy.

Adam Davidson, NPR News.

Copyright © 2010 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.