The China Jobs Question

'If China eliminated its currency misalignment and thus cut its global surplus to 3 to 4 percent of its GDP, that would reduce the U.S. global current account deficit $100 billion to $150 billion. Every $1 billion of exports supports about 6,000 to 8,000 (mainly high-paying manufacturing) jobs in the United States. Hence, such a trade correction would generate an additional 600,000 to 1.2 million jobs. Correcting the Asian currency alignment is by far the most important component of U.S. President Barack Obama's new National Export Initiative. Its budget cost is zero, which also makes it by far the most cost-effective possible step to reduce the unemployment rate and help speed economic recovery.

Such exchange-rate realignment is not without precedent. In 2005, Beijing announced a new "market-oriented" exchange-rate policy and let its currency appreciate 20 to 25 percent. In mid-2008, however, China repegged to the dollar, and the renminbi has ridden it down, taking back about half the previous rise. China has doubled the scale of its currency intervention since 2005, now spending $30 billion to $40 billion a month to prevent the renminbi from rising; on this metric, its currency policy is about one-half as "market-oriented" as when it announced such a strategy five years ago.

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'Regardless of its currency regime, China has been the hottest major export market for U.S. companies in the last decade.

Since China began to gradually appreciate its currency in 2005, U.S. exports to the Asian giant have shot up by 69%, according to the U.S. Commerce Department. That compares to a much more sluggish 19% increase in exports to the rest of the world.

Export of U.S.-manufactured products was up 47% during that same period, compared with an anemic 7% increase to the rest of the world. China alone accounted for half of the dollar-value increase in durable goods exports, led by civil aircraft, semiconductors and industrial machinery.

U.S. farmers have enjoyed great success in China's market. Since 2005, U.S. agricultural exports to China have more than doubled, from $5.7 billion to $13.8 billion. Farm exports to China have been growing three times faster than farm exports to other countries. China now buys more than half of U.S. soybean exports.

If American exports of goods and services had enjoyed the same rate of growth in the rest of the world as they have in China since 2005, U.S. exports would have increased by an additional $600 billion during that period.

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