The Senate voted Monday to advance legislation pressuring the Chinese government to stop undervaluing its currency, a practice most economists agree is giving the country an unfair trade advantage and is costing the U.S. jobs.China is already responding, negatively, as one might imagine. Paul Gigot is not happy, either:
The Senate voted 79-19 to end debate on a motion to proceed to the bill, the Currency Exchange Rate Oversight Reform Act of 2011. While the vote does not mean the bill has passed, the strong show of support suggests it could well be approved in the upper chamber by the week’s end. Passage through the House is less clear, however, and GOP leaders have given no indication they will move forward with it.
Senate Democratic leadership, responsible for bringing the legislation to the Senate floor, heralded it as a way to create jobs and right a long-standing trade imbalance with China.
“China is by far the biggest exploiter of predatory currency practices,” Sen. Charles Schumer (D-N.Y.) said Monday. “[T]hese currency policies artificially raise the price of U.S. exports and suppress the price of imports into the United States, undermining the economic health of American manufacturers and their ability to compete at home and around the globe.”
Senate Majority Leader Harry Reid (D-Nev.) defended his decision to call up the bill after he was attacked by Republicans on his timing, arguing it is an important part of Democrats’ job-creating agenda.
“That massive trade deficit is one reason for our unsustainable unemployment rate,” Reid said.
But some Republicans continued to question Reid’s timing, as well as the tension its passage would likely create with China, the U.S.’s most important trading partner.
Sen. Bob Corker (R-Tenn.) said he feared the legislation would create a dangerous “trade war” with China at a time when the U.S. economy is already unhealthy. Sen. John McCain (R-Ariz.) blasted Senate leadership for side-stepping other basic responsibilities, like creating a federal budget, in order to take up the currency bill, which he said ought to be discussed in “happier times.”
“China currency may be part of the problem ... but the majority of jobs have been lost for other reasons,” McCain said. “I have to express amazement that the issue of China currency is taking precedence over the myriad of other issues we should be acting on.”
No good policy goes unpunished in the U.S. these days—which is clear again from this week's backstage maneuvering on trade. Even as President Obama finally sent free-trade deals with Colombia, Panama and Korea to Congress this week, he has acquiesced to the demand from Senate Democrats for a vote on a bill to impose tariffs on China.The Wall Street Journal says "The U.S. Senate slouches toward a trade war with China," while Glenn Reynolds says of this idea: "Not smart."
The three trade deals have long had enough support to pass the Senate. But the AFL-CIO still opposes them, and so Majority Leader Harry Reid told the White House he wanted the political cover of a vote on the China bill as well. Mr. Reid was pressed by Chuck Schumer, who's been pushing the China bill since 2005, and the likes of Ohio's Sherrod Brown, who faces a tough re-election campaign next year. The White House has long opposed naming China as a currency manipulator, but it agreed not to speak against the bill this week. Sure enough, spokesman Jay Carney said only that the White House is "reviewing" the legislation and even shares its goal of increasing the value of the Chinese currency.
The danger is that without presidential opposition, the bill is likely to whisk through the Senate. One whip count guessed it would get 75 votes. Senate Republicans aren't going to stand in the way of legislation if Mr. Obama won't, especially since China-bashing is popular in the polls and GOP presidential candidate Mitt Romney also wants to impose tariffs on China.
My response is, "It's about time."
Like "international law," the concept of "free trade" is utopian. It does not exist. Those who believe it does exist, as the US does, and act on that belief, as the US also does, end up paying a massive price, as the US has.
I've done a 180 on this. Back in college I supported the NAFTA treaty. I thought it would increase US exports to Mexico. Indeed it did -- US jobs. Mexican workers work for far cheaper than US workers do, with neither the worker protections nor the environmental protections present in the US.
So, how has NAFTA benefitted the US? Cheaper prices for US consumers. That can be a good thing ... until you consider that US consumers are also US workers whom NAFTA has put out of work. At best NAFTA has been a wash, but I would hold that NAFTA has been a disaster for the US.
This seems to be a pattern for free trade agreements. We sign such an agreement with a country and our jobs quickly go to that country. And we benefit ... how?
China may be the worst of the lot. We don't necessarily have a "free trade agrement" with China, but we did grant them permanent "most favored nation" trading status years ago. That seems to have been the time our jobs started fleeing for China in droves.
And for what? Entry into China's market? That has always been the Holy Grail of Free Trade, and it always will be. China's comunist government has always put up barriers to entry and tied up foreign companies with "agreements" that give the bulk of the benefits to the Chinese government.
Cheap consumer goods for the US? Those are of no benefit when the consumers are now out of work because their jobs have left for China and can no longer afford those goods.
But the cost has been enormous: US citizens permenantly unemployed and US industries ravaged. it's time we put a stop to it. It's time we start fighting for the US worker and not US elites. And protect our domestic industries.
Hit China. Hard.
Bring on the trade war.