It looks like the Senate will take up legislation this week threatening sanctions against China for currency manipulation. Here's Business Insider using the scare word "tariff" in their wrap-around of the AP story (my emphasis):
TARIFFS: Washington's Response To Chinese Currency ManipulationNote the constant pussy-footing in the AP story itself — "a political given"? It's an economic given — and also the super-scary phrase "trade war," which the Obama administration is quoted as throwing around.
After years of trying, Congress is taking another stab at retaliating against what many see as Chinese manipulation of its currency to make its exports to the United States cheaper and U.S. exports more expensive.
The Senate is expected to take up legislation Monday to impose higher U.S. duties on Chinese products to offset the perceived advantage that critics say China gets by undervaluing its currency. It's a political given here that China's economic policy has damaged American manufacturers and taken away American jobs. ... Moreover, the Obama administration, like the Bush administration before it, doesn't like the bill, saying quiet diplomacy is a better way to influence Chinese policy and warning that overt sanctions could lead to a destructive trade war.
How much of this editorial undercutting has to do with Chinese money and its influence on U.S. politics, both directly and through corporate intermediaries like WalMart? No way to know.
Deeper into the article, we learn the details of the legislation, as well as the extent of the problem:
[New York Democratic Senator Chuck] Schumer and others say that's a major reason that some 2 million U.S. jobs have been lost to Chinese competitors in the last decade and that the U.S. trade deficit with China last year hit a record $273 billion, some 43 percent of the entire U.S. trade gap. ... If the measure does make it through the Senate, it faces an uncertain future in the House.Note that this is Schumer supporting the legislation.
So in his Monday column, Paul Krugman sets things straight. He thinks the Senate should proceed with the sanctions in order to reduce trade deficits and restore economic health:
To get our trade deficit down, however, we need to make American products more competitive, which in practice means that we need the dollar’s value to fall in terms of other currencies. Yes, some people will shriek about “debasing” the dollar. But sensible policy makers have long known that sometimes a weaker currency means a stronger economy, and have acted on that knowledge. Switzerland, for example, has intervened massively to keep the franc from getting too strong against the euro. Israel has intervened even more forcefully to weaken the shekel.That's been Krugman's argument against the euro all along — if they had their own currencies, countries like Greece and Spain could deflate their drachmas and pesetas and recover through an export boom. Just what he's recommending the U.S. needs to do.
The United States, given its special global role, can’t and shouldn’t be equally aggressive. But given our economy’s desperate need for more jobs, a weaker dollar is very much in our national interest — and we can and should take action against countries that are keeping their currencies undervalued, and thereby standing in the way of a much-needed decline in our trade deficit.
The rest of the column lists the objections and his counter-arguments. A good read.
Back to Schumer and the House for a second. Think this has a prayer?
Consider: (1) China, if it has any brains at all, has huge "investments" in the U.S. political scene. (2) The House is bought and sold by the WalMarts and Kochs of the world. (3) If Schumer is thinking this bill is DAO in the House (or even the Senate), he's bringing it up to trade for something. That "something" could be other Senate legislation, or some PR cred as U.S. jobs tank. Or something else. Any guesses?
Yet Krugman is ever hopeful, and making the case. And yes, the Senate should pull the trigger and do it. I guess we'll find out shortly.
GP
