Obama vs. Bush: Who actually made more progress in revaluing China’s yuan?

Posted by scapozzola on 04/16/2014

Last night, the Department of the Treasury released its Semiannual Report on International Economic and Exchange Rate Policies — the American presidency's twice-a-year chance to name names when it comes to the nasty habit of currency manipulation. And to the surprise of almost no one, it managed to not designate China as such for the 11th time during the span of the Obama administration.

That's unfortunate, because there's ample evidence that China works to devalue its currency. By hoarding American dollars and keeping its own — the yuan — artificially cheap, the Chinese government essentially subsidizes the price of China's exports by placing a tax on America's. That puts U.S. manufacturers and workers at a distinct market disadvantage, and over time, it has cost American jobs. Lots of jobs.

How many? In the decade between 2001 and 2010, the U.S. lost roughly 2.7 million of them to China. And not too many folks were happy about that as America was losing them, including a certain senator from Illinois who now sits in the Oval Office. In fact, while campaigning for the presidency in 2008, then-Senator Barack Obama took President Bush to task for his failure to confront China, and for allowing so many jobs to move overseas:

“The problem is that, for all the tough talk of George W. Bush, he is a patsy when it comes to negotiating (trade) agreements. And what we need to do is to just be better bargainers and say 'look, here’s the bottom line, you guys keep on manipulating your currency, we are going to start shutting off access to some of our markets.'”

That was tough talk, and it set high expectations for an Obama presidency — namely, that the incoming 44th president would chart a strong course when dealing with Beijing over its curency policies.

Yet President Obama appears to have had even less success in tackling China’s currency undervaluation than his predecessor had. In fact, a cursory read of the numbers show that progress on revaluing China’s currency, the yuan, has actually slowed during the Obama presidency.

Take a look at some simple math:

  • During the second term of the Bush Administration, the yuan rose 1.4377 against the dollar. When measured against the yuan’s value of 6.8388 in July 2008, it means a gain of 21 percent.
  • In a similar timeframe during the Obama administration, from January 2010 to April 2014, the yuan appreciated only 0.618 against the dollar. When you start counting against the recent mark of 6.211 yuan to the dollar, that means a gain of only 9 percent.

It begs the question: What happened to all that tough talk from 2008?

The good news is that the president recently vowed to bypass Congress and act unilaterally to get things done on the economy, saying, “I’ve got a pen and I’ve got a phone.” Well, if President Obama is serious about making 2014 a “Year of Action,” then his first step should be to formally declare China a currency manipulator. Doing so would initiate a process that could compel Beijing to formally revalue the yuan. 

It’s well past time for such action. Research suggests that ending global currency manipulation could create millions of jobs in the American economy. It's a shame the Obama administration declined yet another chance to start that process. 

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