For almost 40 years, my company, Exact Tool & Die, Inc., has been manufacturing precision metal stamping dies, automotive stampings, and assemblies in Ohio. Along the way, I’ve watched many of my fellow Ohio manufacturers go out of business. Seeing so many factories close their doors has been troubling, and our state has lost roughly 335,000 manufacturing jobs over the past two decades. Overall, the US has lost almost 5 million manufacturing jobs since 2000.
My company’s products are highly competitive, and yet we continue to lose sales to China. And what really bothers me is that the products we’re seeing from China are often of lower quality. But they come into the US at a cheap price simply because China has made a longstanding practice of artificially manipulating its currency to lower the cost of its exports. China’s manufacturers also receive billions and billions of dollars in subsidies from their central government. All of this violates the rules that China accepted when it joined the World Trade Organization in 2001. But Washington has done nothing of consequence over the past 20 years to address this “China problem.”
In studying the currency issue, I’ve learned two things. First, Congress has toyed around with legislation at times, but has never actually taken action to give the federal government real tools to respond when countries artificially undervalue their currency. And this matters because it’s not just China that engages in “currency manipulation.” Japan, South Korea, Germany, and others also take steps to lower the value of their currencies.
Second, there’s also the problem of the US dollar becoming continually overvalued simply because foreign investors keep buying US securities and financial assets. I’m all for foreign investment, but it’s become too much of a good thing. Excessive amounts of incoming capital have the unfortunate side effect of driving up the value of the dollar. And that makes my products more expensive when they compete head-to-head with imports.
Last year, the Coalition for a Prosperous America issued a study showing the US dollar was overvalued by roughly 25 percent. That means American-made goods and services become 25 percent more expensive than they should be when we try to sell them overseas. It also makes imports cheaper than they would be if the dollar was priced fairly.
If Congress really wants to help America’s manufacturers and farmers become competitive against China and other countries, it needs to start addressing this currency issue. Thankfully, some in Washington are starting to listen. There have been proposals to draft legislation that would require the Federal Reserve to help US manufacturers by imposing a modest “market access” fee on incoming investment. That would help to gently lower the dollar price to a competitive level, allowing my company and other manufacturers to export more. Legislation like that could work particularly well if it also contained measures to respond when countries like China deliberately weaken their currency in order to boost exports.
Manufacturing matters in America because companies like mine create good jobs and drive demand for other goods and services throughout the supply chain. Washington needs to appreciate how important small and mid-sized businesses are. And when other countries cheat, our elected officials should act to make sure that there are consequences.
Frank K. Chesek is president of Exact Tool & Die, Inc., in Brook Park, Ohio.