June 17 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said China and the U.S. are both making the same mistake when it comes to their government’s trade policies: trying to create more jobs.
“You can have everybody in the workforce employed if half the workforce is digging a hole and the other half is filling it in,” Greenspan said at a luncheon at the Aspen Institute in Washington today. “But trade policy has always been about creating productive jobs.”
The U.S., with its reluctance to enact new free-trade agreements, and China, by “basically manipulating its currency,” are mistakenly trying to increase the number of jobs, he said.
Greenspan directed his commentary at U.S. Trade Representative Ron Kirk, saying his pledge to put Americans back to work is a misplaced goal. Kirk, who also spoke at the event, countered that it’s a political necessity to use his office to boost American hiring, especially with the unemployment rate at more than 9 percent.
After the luncheon, Greenspan said, “What they are doing is the definition of currency manipulation.”
That remark by Greenspan may provide fodder for lawmakers in the House of Representatives and Senate who are again ramping up pressure for legislation that would let companies petition higher duties on imports to compensate for a weak Chinese yuan.
In its twice-yearly reports to Congress, the U.S. Treasury Department has refrained from labeling China a currency manipulator.
The yuan rose to a 17-year high after the National Business Daily newspaper said there is speculation China will announce a “relatively important” currency policy on June 19, the anniversary of the scrapping of a two-year peg.
The yuan completed a weekly advance after the People’s Bank of China set the yuan’s reference rate 0.13 percent stronger to a record 6.4716 per dollar today. The yuan gained 0.09 percent this week.
Lawmakers such as House Minority Leader Nancy Pelosi say that appreciation hasn’t been fast enough, and that they will try to force a vote on a measure to allow greater tariffs.
Kirk tried today to damp discussion of China’s currency.
“There is a risk in thinking that if we could just get China to address its currency, everything will be OK,” he said. “When you look at the breadth of what they are doing on indigenous innovation, you say ’whoa.’”
Those measures to restrict investment and boost domestic technology in China could have greater impact on the competitiveness of American companies, he said.
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