The U.S. could create from 620,000 to 1.3 million manufacturing jobs by eliminating currency manipulation and taking a series of coordinated policy steps, according to a new report from the Economic Policy Institute.
The EPI report called currency manipulation “one of the most important causes of growing U.S. trade deficits, and of unemployment and slow economic growth in the United States and Europe.” It charges that currency manipulation “distorts international trade flows by artificially lowering the cost of U.S. imports and raising the cost of U.S. exports.”
According to the report, the U.S. could reduce its trade deficit by $190 billion to $400 billion over three years by ending currency manipulation. This action would reduce the national unemployment rate by between 1.0 and 2.1%. It would create between 2.2 and 4.7 million jobs overall and shrink the federal deficit by between $78.8 billion and $165.8 billion, the report claims.
From January through November of 2012, the U.S. trade deficit in manufactured goods was $633.76 billion. The overall trade gap in November was $48.7 billion.
“This report shows that Congress is obsessed with the wrong deficit,” said Scott Paul, president of the Alliance for American Manufacturing. “To grow jobs and boost the economy, we must eliminate the trade deficit. Ending currency manipulation will get us part of the way there, but we also need a smart manufacturing policy, one that focuses on innovation, public investment, skills, and trade enforcement.”
Manufacturing Policies Needed
EPI said currency manipulation would only solve part of the trade deficit and should be accompanied by a series of actions to promote manufacturing.
“The United States and its domestic manufacturers are competing in an environment where many other countries, including Germany, Japan, China, and Korea, operate comprehensive manufacturing and labor force development programs to support their traded goods industries; the United States does not,” the report charged.
Among the policy actions recommended by EPI:
- Expand investments in manufacturing R&D and technology diffusion programs
- Provide public financial support to small and medium-sized manufacturers
- Develop school-to-work job training systems for non-college-educated workers, including apprenticeship programs modeled on Danish and German models
- Develop new trade policies that support fair, balanced, and sustainable trade
- Plan and implement manufacturing and traded industry strategies, including establishing an institution akin to Japan’s Ministry of Economy, Trade, and Industry
- Make massive investments in infrastructure, for example by meeting the United States’ $2.2 trillion worth of infrastructure needs over the next five years
- Greatly expand public and private investments in green and renewable energy technologies
The report said such steps could lead to the complete elimination of the U.S. goods trade deficit and allow the nation to recover most or all of the 5.7 million manufacturing jobs lost between March 1998 and October 2012.