U.S. Senator Richard Shelby (R-Ala.), ranking Republican on the Senate Committee on Banking, Housing, and Urban Affairs, today made the following statement during a Committee hearing on the Treasury Department’s report on international economic and exchange rate policies oversight.

Statement of Senator Richard C. Shelby

Committee on Banking, Housing and Urban Affairs

Hearing on the Treasury Department’s Report on International Economic and Exchange Rate Policies Oversight

September 16, 2010

“Thank you, Mr. Chairman.

“There is no question that China manipulates its currency in order to subsidize Chinese exports.   The only question is: Why is the Administration protecting China by refusing to designate it as a currency manipulator?

“Although the previous Administration engaged unsuccessfully with China to resolve the resulting imbalances, this administration insists on staying the course.

”Make no mistake, the Chinese will continue to “negotiate” as long as they deem it in their interest to do so.  Mr. Chairman, I believe that the time for talking has long passed, and the time for action has arrived. 

“It is time for the Administration to recognize the consequences of China’s manipulation for American workers and manufacturers, and for the stability of the global financial and economic system.

“Because the Chinese continue to manipulate their currency, thousands of Americans are out of work.

“American workers can compete with any workers in the world, but they should not have to compete against foreign firms that receive massive subsidies.

“Unfortunately, the United States relies heavily on Chinese investment which we use to finance our exploding debt.

“Our deficit last year was more than $1.4 trillion, close to 10% of our GDP.  This year’s deficit is projected to be even higher.

“Nevertheless, the acolytes of Keynesian economics advocate further doses of economic stimulus funded by additional debt which will most likely be purchased by the Chinese, further weakening our position.

“What has the recent stimulus produced besides further indebtedness to the Chinese?  The unemployment rate has risen to 9.6% from 8.2% since the stimulus was enacted and 3.2 million payroll jobs have been lost.  The housing market languishes and consumer and business confidence remain low. 

“The Omnibus Trade and Competitiveness Act of 1988 requires the Treasury Secretary to report on exchange rate policies of major U.S. trading partners.

“Under the Act, Treasury must consider whether countries manipulate exchange rates for purposes of preventing balance of payments adjustments or gaining unfair trade advantage.

“There is clear evidence that, whatever China’s stated intent, the result of China’s currency manipulation has been an unfair advantage in international trade. 

“Many of my colleagues and I, on behalf of a growing population of unemployed U.S. workers, want to know why Treasury refuses to act. 

“Mr. Secretary, this Administration promised to usher in an era of change.  While your idea of positive change has rarely coincided with mine, in this particular instance a significant change would have been welcome.

“I continue to be confused by the Administration’s reluctance to take action.  Labeling a country as a currency manipulator does not require draconian action under the Omnibus Trade and Competitiveness Act. 

“The immediate repercussions are merely stepped-up monitoring and greater vigilance in dialogue. 

“In the face of the previous Administration’s failure to take effective action, Senator Dodd and I introduced legislation back in 2007 to improve the situation.

“Our legislation tightened the definition of currency manipulation, imposed specific time frames and benchmarks, and required the Administration to take more stringent actions the longer a country’s currency manipulation continued.

“Since this Administration has decided to follow in the Bush Administration’s footsteps and not take Chinese currency manipulation seriously, it may be time for new legislation to ensure that Treasury looks out for American workers, not Chinese creditors.

“It is a bit unclear why the Administration has chosen to isolate this particular issue from its change agenda.

“Just prior to the most recent presidential election, then-candidate Obama wrote the following to textile organizations:

‘The massive current account surpluses accumulated by China are directly related to its manipulation of its currency’s value.  The result is not good for the United States, not good for the global economy, and likely to create problems in China itself.’       

“In addition, Secretary Geithner, in response to Senate Finance Committee questions during your 2009 confirmation hearing, you stated that:

‘President Obama - backed by the conclusions of a broad range of economists - believes that China is manipulating its currency.’

“Strong words.  Unfortunately, once in office, the Administration showed that it was all bark and no bite.  It is clear that when the Administration had to choose between protecting its relationship with its Chinese creditors so that it could grow the size of government, and protecting American workers from unfair trade practices, American workers got the short end of the stick.

“It is time that the Administration reorder its priorities.  American workers are tired of hearing about delicate international dialogue between global finance ministers at resort cities.  They want jobs.

“American manufacturers are tired of losing out to subsidized foreign imports while Treasury continues to buck an overwhelming consensus that China manipulates its currency for unfair trade advantage.

“The American public is tired of hearing about the sophisticated nuances of international diplomacy.  They want the Administration to fulfill its promise of balanced international trade and they want us to overcome our addiction to Chinese-funded debt.

“American households and businesses are acting to restore balance in their finances and they expect us to do the same.

“Nevertheless, federal spending continues to grow unrestricted, unemployment remains far too high, and the Administration refuses to take action against a recalcitrant currency manipulator.  I think that it is high time, Mr. Secretary, that we see a little bit of that Hope and Change you promised.

“Thank you Mr. Chairman.”