Does renminbi undervaluation cost US jobs?

Check out the clashing views on the renminbi and American jobs at Foreign Policy.

Fred Bergsten wants China to significantly revalue the renminbi (something like a 10% immediate appreciation), saying that “China is exporting large doses of unemployment to the rest of the world.” He thinks a trade correction would create a million US jobs, using a rule of thumb in which “$1 billion of exports supports about 6,000 to 8,000 (mainly high-paying manufacturing) jobs in the United States.”

Phil Levy offers the rebuttal. In normal times, most believe the trade balance doesn’t affect employment. In a recession, could the trade balance affect the unemployment rate? He points to Ray Fair’s econometric model, which suggests that Chinese undervaluation has actually created US jobs. He’s also not a fan of Bergsten’s rule of thumb.

The US-Sino Currency Dispute: New Insights from Economics, Politics, and Law

The US Treasury didn’t issue its currency manipulator report today, but there’s still plenty of reading material on the renminbi being published. The CEPR eBook The US-Sino Currency Dispute: New Insights from Economics, Politics, and Law, edited by Simon J. Evenett, is available online at http://www.voxeu.org.

Stiglitz on renminbi revaluation

Joe Stiglitz’s latest column at Project Syndicate warns the US against starting a trade war over China’s exchange rate.

On perspective:

Even in absolute value, Saudi Arabia’s multilateral merchandise surplus of $212 billion in 2008 dwarfs China’s $175 billion surplus; as a percentage of GDP, Saudi Arabia’s current-account surplus, at 11.5% of GDP, is more than twice that of China. Saudi Arabia’s surplus would be far higher were it not for US armaments exports.

In a global economy with deficient aggregate demand, current-account surpluses are a problem. But China’s current-account surplus is actually less than the combined figure for Japan and Germany; as a percentage of GDP, it is 5%, compared to Germany’s 5.2%.

On politics:

China recognizes that its currency needs to appreciate over the long run, and politicizing the speed at which it does so has been counterproductive. (Since it began revaluing its exchange rate in July 2005, the adjustment has been half or more of what most experts think is required.) Moreover, starting a bilateral confrontation is unwise.

Since China’s multilateral surplus is the economic issue and many countries are concerned about it, the US should seek a multilateral, rules-based solution. Imposing unilateral duties after unilaterally labeling China a “currency manipulator” would undermine the multilateral system, with little payoff. China might respond by imposing duties on those American products effectively directly or indirectly subsidized by America’s massive bailouts of its banks and car companies.

No one wins from a trade war. So America should be wary of igniting one in the midst of an uncertain global recovery – as popular as it might be with politicians whose constituents are justly concerned about high unemployment, and as easy as it is to look for blame elsewhere.

Brazil, U.S. Agree to Avoid Tariffs in Cotton Dispute

Bloomberg:

The Obama administration offered $147.3 million in assistance to Brazilian cotton producers and suspended an export-credit program for American farmers, in a bid to end a trade dispute with the Latin American nation.
The government will also seek to ease sanitary barriers to Brazilian imports of pork and beef, U.S. Trade Representative Ron Kirk said in a statement today on the preliminary deal. The U.S., which lost a World Trade Organization ruling in August that said its cotton subsidies violate global trade rules, will work with Brazil to reach a comprehensive agreement by June.
“We now have a clear path forward, one that is in the best interest of both the United States and Brazil,” Kirk said. “As a result of our discussions with Brazil we have avoided imposition of higher tariffs.”
The U.S. for now dodges as much as $830 million in trade sanctions on 102 goods including ketchup, cars and boats that Brazil targeted. In addition to financial assistance for Brazilian farmers, the U.S. halted the GSM-102 program that guarantees the credit foreign customers use to by American cotton, and said it will be restarted with higher fees.
Any other changes to U.S. cotton programs are pushed back until at least 2012, when the U.S. Congress will have to revisit the broader issue of farm subsidies before existing legislation governing the nation’s agriculture policies expires.

ACTA

I’m not sure the rumored/leaked “Anti-Counterfeiting Trade Agreement” (14MB pdf) is really a trade agreement. The provisions receiving attention make it sound much more like an intellectual property enforcement cooperation agreement. David Post says “it is really about is the tighter enforcement of copyright law on the Net.” Margot Kaminski says it “amps up IP protection and criminal sanctions, without respecting existing international institutional process and involving the interests of developing countries.”

I know nothing about ACTA. If posts from Volokh to Balkinization say it’s bad law, there’s a decent chance it is. I haven’t seen any trade bloggers analyzing the proposed deal.

“Terms-of-Trade Gains, Tariff Changes, and Productivity Growth” (NBER 15592)

The NBER Digest on the work of Robert C. Feenstra, Benjamin R. Mandel, Marshall B. Reinsdorf, and Matthew J. Slaughter:

In the past decade, the U.S. economy clearly enjoyed faster productivity growth than in previous time periods. The authors suggest that the magnitude of this acceleration has been overstated, with a sizable share of the gains actually being accounted for by the benefits of international trade. Their findings indicate that from 1995 through 2006, the actual average growth rates of the price indexes for U.S. imports are 1.5 percent per year lower than the growth rate of price indexes calculated using official methods. Thus, properly measured terms-of-trade gains can account for close to 0.2 percentage points per year, or about 20 percent, of the apparent increase in productivity growth for the U.S. economy over this period.