Currency manipulation, by which a country intentionally weakens the value of its own currency in order to boost exports, has not been kind to the U.S. economy. Currency-manipulating countries have contributed to a significant increase in the U.S. trade deficit, harmed U.S. competitiveness in domestic and international markets, and resulted in a significant decline in manufacturing jobs. Ending currency manipulation, according to a recent study published by the Economic Policy Institute entitled Stop Currency Manipulation and Create Millions of Jobs, would reverse these trends and create up to 5.8 million jobs in the United States.
In this study, Dr. Robert E. Scott argues that stopping "currency manipulators," particularly China, through a variety of methods, would have a significant positive impact on the U.S. economy and particularly manufacturing. Dr. Scott argues that an effective short-term solution would be for Congress to "pass legislation authorizing the Commerce Department to treat currency manipulation as a countervailable subsidy," which would allow U.S. producers to petition for relief under existing countervailing duty laws. Whatever the method, Dr. Scott argues that ending currency manipulation could reduce the U.S. trade deficit by $200 billion to $500 billion. As a result, U.S. gross domestic product (GDP) would increase by $288 billion to $720 billion and the U.S. economy would create 2.3 million to 5.8 million new jobs. New jobs would appear in every state and the District of Columbia. Larger states such as California and Texas would receive the highest number of jobs, although other states such as Wisconsin and Indiana would benefit from higher percentages of jobs created as a share of total jobs in each state.
The main beneficiary of these new jobs would be manufacturing, which could create an estimated 891,500 jobs by 2015 under a "low impact scenario," and 2,337,300 jobs under a "high impact scenario." A variety of manufacturing sectors would see significant job growth. Machinery (excluding electrical), computer and electronic parts manufacturing, and transportation manufacturing sectors (including auto, aerospace, railroad, and ship industries) would each benefit from 100,000 to 300,000 new jobs. Industrial supplies sectors (chemicals, plastics and rubber products, paper, and others) would also see a total of 206,900 to 477,300 new jobs by 2015.
Dr. Scott's study demonstrates the damage that currency manipulation has caused to the U.S. economy and manufacturing. His research, however, shows that much of what has been lost can be regained by stopping currency manipulation. The U.S. trade deficit will fall, GDP will increase, and—most importantly—new jobs, especially in manufacturing, will be created.