The United States could create 5.8 million jobs if it moved to end global currency manipulation, according to a report by the Economic Policy Institute.
The group, a Washington think tank supported by organized labor, said that manipulation of currency exchange rates is a key factor in the United States' $703-billion annual trade deficit.
Several foreign countries devalue their currencies to make their products cheaper, making it difficult for U.S. manufacturers to compete, the report said.
The report suggests that by realigning exchange rates, U.S. trade deficits would be reduced by up to $500 billion per year by 2015. Such a move would increase U.S. gross domestic product by up to $720 billion per year and create up to 5.8 million jobs, the report said.
Realigning exchange rates could also prompt increased tax revenue and reduce federal budget deficits by up to $266 billion in 2015, the EPI said.
"Congress and the administration have a new focus on manufacturing because they understand its value to the American economy," said Scott Paul, president of the Alliance for American Manufacturing. "But they are ignoring the most important job-creating opportunity for manufacturing: stopping currency manipulation. The key to an economic recovery, especially in California, is restoring manufacturing job growth. To shore up those jobs, Washington should launch a national manufacturing strategy that starts with passing bipartisan legislation to end currency manipulation."
A bipartisan majority in the Senate and the House has signed letters urging the Obama administration to address "foreign currency manipulation" in the talks with Japan and the other nations.
And there has been an outcry in congressional and business circles, particularly the auto industry, over Japan's weakened currency. The yen has fallen about 25% against the dollar in the last year, helping boost that country's exports and profits by making its goods cheaper in foreign markets.
"Currency manipulation can negate or greatly reduce the benefits of a free-trade agreement and may have a devastating impact on American companies and workers," said the Senate letter, signed by 60 members and led by Lindsey Graham (R-S.C.) and Debbie Stabenow (D-Mich.).
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