Nobel-Prize winning economist Robert Mundell said U.S. legislation to press China to raise the value of the yuan would be a “disaster” and fail to narrow the trade deficit between the two nations.

“This is not going to help Americans,” Mundell said in a Bloomberg Television interview Hong Kong. “This is not going to create jobs for Americans. It’s just going to create a disaster.”

U.S. lawmakers will vote in two days on legislation that would let American companies petition for higher duties on imports from China to compensate for the effect of a weak currency. The yuan has appreciated about 2 percent against the dollar since June 19, when China’s central bank said it would pursue a more flexible exchange rate after keeping the currency at about 6.83 versus the U.S. currency for almost two years.

The bill “would create a very damaging thing to the world economy and the stability of Asia,” Mundell said. “This would have a wounding effect on the stability of international relations. There’s never been any precedent in economic history where a country through any legal system was forced to appreciate its currency relative to another country.”

Chinese Premier Wen Jiabao said on Sept. 23 in New York that if authorities agreed to demands for at least a 20 percent appreciation of the yuan, it would cause severe job losses and trigger social instability.

‘Huge Deficit’

Mundell, who won the Nobel Prize in 1999 for research that helped lay the foundation for Europe’s single currency, said there is little historical evidence that China allowing its currency to appreciate will benefit the U.S. or aid its balance of payments.

“It’s not going to have much of a dent in the U.S. deficit,” he said. “America has had a huge deficit since the 1980s. None of that is going to change if China changes its exchange rate.”

The Columbia University professor said the U.S. should “get away from these distractions” of trying to pressure China to allow its currency to appreciate and focus on the larger “instability” between the dollar and the euro. Policy makers should try to keep the currencies within a range to prevent “huge swings” in the price of raw materials such as oil, he said.

The euro-dollar fluctuation “is a terrible thing for the world economy,” Mundell said. “We’ve never been in this unstable position in the entire currency history of 3,000 years.”