The US House of Representatives on Wednesday passed a bill to press China to let its currency rise faster, amid accusations that China suppressed the value of its currency and placed a drag on US job creation. Bur China has urged the US lawmakers to recognize the importance of Sino-US trade and economic ties and to avoid protectionist measures against China.
Structural problems with the United States according to economist John Ross are responsible for the current difficulties facing the world’s largest economy, and not China’s currency.
“The current anti-China moves in the US Congress are purely a publicity attempt to distract attention from the real problems facing the US economy,” Ross, a visiting professor at Antai College of Economics and Management, Shanghai Jiaotong University, told pressmen, Monday.
Ross’ words come one week after 93 US lawmakers signed a letter urging Democratic leaders in the House of Representatives to schedule a vote on a bill to get tougher with China.
The bill would allow the US Commerce Department to slap countervailing and anti-dumping duties on “injurious imports from any country that persistently undervalues its currency.”
Ross, who served as director of economic and business policy to the Mayor of London Ken Livingstone from 2000 to 2008, said the Chinese currency was not the root cause of the United States’ trade deficit with China.
Many economists attribute the difficulties facing the US economy in the form of high unemployment and staggering fiscal deficit to the structural problems that the present administration has not been able to address.
“The problem in the US economy is that its savings level is so low that it cannot even finance its own investment,” said Ross.
During the last two years, capital consumption in the United States exceeded savings in the country, which meant that the world’s largest economy was not actually creating any capital at all, he said.
“This has not been seen in America since 1929-1932 at the beginning of the Great Depression.” Even with a stronger Chinese currency, “no extra jobs would be created in the US, and US consumers would simply have to pay higher prices,” he said.
“America does not competitively produce the great majority of the goods which China exports, so even if Chinese products were kept out of America, they would be replaced by imports from other low cost producers.”
The only way for the US economy to recover was to sharply increase its own savings level so that it could finance its own investment and not rely on inflows of capital from abroad, he said.