Speaking of jobs plans, Mitt Romney released his yesterday (if you want the nickel version, read this USA Today op-ed). Aside from the factual errors, in general, it’s a boilerplate document, with the same low taxes, deregulation and union busting that has characterized the modern Republican Party for decades. It’s a laissez-faire program from the architects of the Bush Administration economic policy, Glen Hubbard and Greg Mankiw (and whatever indepedence they showed outside of government, they’ve already proven malleable enough to to the party line inside it). It’s amusing that Hubbard references the slow growth of the 2002-2007 period in the foreward, without mentioning his role in that. There’s some piddling stuff on job retraining and a couple interesting ideas on high-skill visas, but they aren’t all that different from what the Administration supports. More crucially, Romney wants to block grant Medicaid and cap domestic spending at 20% of GDP, a cut of hundreds of billions of dollars a year. Romney is right that job creation requires economic growth, but there’s simply nothing in his program that would foster that growth.
Except. There’s the issue of trade. Now this starts unexceptionally. Romney supports the existing trade agreements with South Korea, Panama and Colombia (on this point, the President agrees). And he wants to finish off the Trans-Pacific Partnership, which Obama also supports (see here). He also wants to pursue a “Reagan Economic Zone,” which I assume is important because it has the word “Reagan” in it. But then there’s this:
Current U.S. law requires that the Department of the Treasury release a biannual review in which it identifies any countries that are manipulating their currency to gain an unfair advantage. The Department of Commerce also has the power to find that Chinese currency policy constitutes an unfair subsidy to Chinese exporters, and to assess countervailing duties on Chinese products. The Obama administration has declined to take either action, effectively accepting China’s problematic practices. That acceptance has to end. If China fails to move quickly to bring its currency to fair value, the Department of the Treasury in a Romney administration will designate China a currency manipulator and the Department of Commerce will impose countervailing duties.
Later on he talks about targeted tariffs due to unfair practices (the Obama Administration just won a case at the WTO on such a tariff on the Chinese tire industry), but this is something new. And Romney happens to be absolutely correct here. In fact, this is the only thing in his op-ed that will come close to having a jobs impact. As Dean Baker wrote, getting the dollar down and balancing the trade deficit is the most important long-term job creation policy. That’s the design of naming China a currency manipulator. Every time this threat has been made, China slowly appreciates the value of their currency, but over time, it has practically held constant.
Kevin Drum has two objections here. One, this is pandering and it’ll never actually happen, and two, that China’s currency is where it should be. Let’s first deal with the latter. He bases this on something called the Economist’s Big Mac index, which is exactly what it sounds like: assessing the value of a hamburger across nations, adjusting for labor costs. According to this, the yuan is at fair value against the dollar. In non-grilled meat assessments, however, even the current Treasury Department has said that the yuan is undervalued, as has the IMF and the Peterson Institute for International Economics and the Federal Reserve. According to the Alliance for American Manufacturing, forcing the yuan to appreciate would create over 2 million manufacturing jobs.
As for whether this would ever come to pass, there’s actually broad agreement on this in the House of Representatives. A bill last year that would sanction any trading partner which manipulates their currency attracted 375 votes last year. The House Republican leadership is trying to block a new version of this bill from coming up, but Democrats have it as a central part of their agenda, and they are trying to move a discharge petition that would force the bill to the floor, where it would almost certainly have the votes. This is from just yesterday at a Democratic press conference with Steny Hoyer. Yes, that Steny Hoyer:
But because that was supported overwhelmingly and because clearly American workers making American products, or selling services for that matter, but products have been disadvantaged by the manipulation of currency prices, not driven by the market but driven by uncompetitive, and we believe violative of international rules. But we also believe that, we hoped the Senate would move on that as well. We may also have the opportunity to offer amendments on that issue.
Q: Is that legislation that would brand them a currency manipulator or…
Whip Hoyer. No, no, no, no. Excuse me. The legislation does not deal with a specific country. Clearly, China we believe, is in fact manipulating its currency. As I said, Chinese goods are cheaper here and American goods are more expensive there, which undermines our workers. But, the legislation itself is not country specific. It says that any trading partner that manipulates their currency to affect that end would be sanctioned under the legislation.
Almost every House Democrat has signed the discharge petition. There will be more on the issue from House Democrats later in the week. They have an ally in the Republican Chair of the House Ways and Means Committee, Dave Camp. There’s ample reason to believe that this bill can pass again. There’s legislation in the Senate too.
Now, you say, multinational corporations don’t want to see the yuan rise and the cost of their goods made in their Chinese factories rise as well, and surely they would block this. Who would be more of an avatar for multinationals than Mitt Romney? And what he said on the campaign trail yesterday was pretty effective:
It will serve as a powerful engine for opening markets to our goods and services, and also a mechanism for confronting nations like China that violate trade rules while free-riding on the international system. I will not stand by while China pursues an economic development policy that relies on the unfair treatment of U.S. companies and the theft of their intellectual property. I have no interest in starting a trade war with China, but I cannot accept our current trade surrender.
It’s not just a surrender, it’s already a war. Yesterday, China said they would block imports of the Chevy Volt unless they were allowed to receive its core technology secrets. This is just corporate espionage in the guise of trade negotiations. After the trade secrets are given, China will just use its manipulated currency to make the same cars for less.
Romney has one serious proposal in his entire plan. The Obama Administration responded to Republican anti-regulatory pressure by canceling EPA ozone standards. Why couldn’t the same pressure exist here? Why shouldn’t this move Treasury to brand China a currency manipulator, especially when the Democratic rank and file would support it?