Despite Bipartisan Action Against China’s Currency Manipulation, Lael Brainard Does the Opposite
Lael Brainard, Biden’s pick for Vice Chairman at the Federal Reserve, worked against both political parties to alleviate pressure on China for their currency manipulation while working for the Obama administration. Around that time, both Republican and Democrats expressed concern over China undervaluing its currency, which manipulates the markets, and went so far as to draft legislation to protect the market from China’s behavior, but she ignored those concerns and concluded that China is not a currency manipulator.
Brainard’s Report to Congress
While Undersecretary of Treasury for International Affairs from 2010-2013, Lael Brainard oversaw many issues relating to China. Most notably, she oversaw reports to Congress concluding that China did not meet the legal parameters to be listed as a currency manipulator,
“standards identified in Section 3004 of the [Omnibus Trade and Competitiveness] Act during the period covered in this Report have not been met with respect to China.”
The Office of International Affairs at Treasury sent that report to Congress in 2011, amongst others, concluding that their discussions with China and other findings did not show that China is a currency manipulator.
Trump Administration Designates China as a Currency Manipulator
However, individuals from both sides of the aisle stated otherwise, before and after her tenure at Treasury. In 2019, President Trump’s Treasury Department designated China as a currency manipulator, using the same criteria that was given to Brainard during her tenure. The Omnibus Trade and Competitiveness Act of 1988 requires an analysis of the exchange rate policies of other countries, and Section 3004 of the Act gives language and requirements to determine whether or not a country manipulates the rate of exchange between their currency and the United States dollar for purposes of preventing unfair competitive advantage in international trade. Former Treasury Secretary, Steve Mnuchin, sent a report to Congress determining that China is a currency manipulator through protracted, large-scale intervention in the foreign exchange market.
Mnuchin threaded the same legal requirements as Brainard, but with a sharp contrast to Brainard’s Obama-era reports saying,
“Treasury determines that while China does not meet the standards identified in Section 3004 of the 1988 Act at this time, Treasury will carefully monitor and review this determination over the following 6-month period in light of the exceptionally large and growing bilateral trade imbalance between China and the United States and China’s history of facilitating an undervalued currency. Treasury continues to have significant concerns about China’s currency practices, particularly in light of the misalignment and undervaluation of the RMB relative to the dollar (emphasis added).
Within months of issuing the report putting China on notice for their actions, the Trump administration formally designated them a “currency manipulator” and found that China also violated their G20 commitments on the issue.
Bipartisan Support Existed Against China’s Manipulation BEFORE Brainard’s Contradictory Reports
The Trump administration’s report to Congress showed that China had a longstanding history of this kind of behavior. This is corroborated by both Republican and Democratic Senators who expressed concerns, vis a vis China’s manipulation of its currency in the foreign market, prior to Brainard releasing the 2011 report. The existence of evidence against China’s predatory practices prior to the 2011 report proves that Brainard dangerously ignored findings from within her own department, as well as Congress, and allowed China to continue manipulating the market and gaining an unfair advantage in trade.
Senator Graham, in an interview with Greta van Susteren in 2011, states that “the Chinese government intentionally creates a manipulation of the value of their currency, called the yuan.” Senator Schumer echoed Graham’s statements by adding that “China’s currency manipulation undermine[s] U.S. manufacturing base by making U.S.-made goods more expensive relative to foreign goods.” Both Senators supported legislation to address China’s currency manipulation, but Brainard ignored their findings and concerns and sought to do the exact opposite.
Brainard is a nominee that chooses to ignore positive bipartisan efforts to hold China accountable for their malicious economic behavior and should be rejected for any leadership position at the Fed.