Tuesday, October 4, 2011

China Currency Update

The Senate yesterday overwhelmingly voted to proceed on the China currency legislation, clearing the way for a final Senate vote - and almost certain approval - later this week.  Also yesterday, the White House submitted the FTA implementing bills for the Korea, Colombia and Panama FTAs, but since a vote on those agreements isn't expected until next week, I'm going to focus on currency tonight and provide a nice little laundry list of things you should read on the China currency issue before the Senate vote:
  • The Club for Growth's Chris Chocola lays out six great reasons why the Senate legislation should die.  He also notes, again correctly, that the United States should fix its own fiscal and regulatory problems instead of scapegoating China.  Speaking of that, am I the only one who finds it horribly appropriate that American pols' fiscal incontinence actually enables China to manage the value of its currency via the purchase of US debt?  And yet they blame China.  Sigh.
  • The Senate roll call vote on the motion to proceed is available here.  Please notice that the "nays" include most, if not all, of the "Tea Party" Senators: Coats (R-IN), Coburn (R-OK), DeMint (R-SC), Johnson (R-WI), Lee (R-UT), Paul (R-KY), Rubio (R-FL) and Toomey (R-PA).  So much for that tiresome meme that Tea Partiers are anti-trade Luddites.  Also among the "nays" was Roy Blunt (R-MO), who is the congressional point man for presidential candidate (and reborn currency-hawk) Mitt Romney.  Hmm.
  • House Speaker Boehner stated today that the Senate currency legislation is "dangerous" and "well beyond" what Congress should be doing.  In other news, Boehner reported that the sky is blue. [UPDATED: The WSJ rightly applauds Speaker Boehner's "adult" leadership on the currency issue, and chastises the President and a certain GOP presidential candidate for their utter lack thereof.]
  • Meanwhile, the Petersen Institute's Joseph E. Gagnon, Nicholas R. Lardy and Nicholas Borst estimate that China's currency policies are causing real economic pain - to the tune of $240 billion per year - to China!  I wonder what noted currency hawk and the authors' PIEE colleague C. Fred Bergsten would say about that.  (Speaking of Bergsten, am I the only one who's confused by his latest op-ed, which calls on the US to devalue its currency by 20% in order to bolster its companies' export competitiveness and then retaliate against China for, err, devaluing its currency by 20% in order to bolster its companies' export competitiveness?)
  • Speaking of currency hawks, Paul Krugman drafted yet another op-ed on why China's currency policy is so, so awful.  In it, Krugman (a) proudly admits that the Senate's China currency bill would increase taxes on American families and businesses; (b) also admits that, even if the US does nothing, China's rampant inflation will gradually eliminate the RMB's undervaluation; (c) also admits that the currency bill carries a real risk of starting a "trade war" with China; yet (d) never gets around to explaining how the Senate legislation actually will force China to appreciate the RMB.  Wait, did Dr. Krugman just make our point for us?  I'm so confused.
  • And, last, just as the United States is finally getting around to considering its Bush-era FTAs and as the Senate is busying itself with attacking China, guess what our increasingly-awesome neighbors to the North (Canada) - who quickly implemented their FTA with Colombia months ago - are up to?  Well, they're now concluding a new bilateral investment agreement with... wait for it... China!  
One last note: since the blogging will be lighter around here for a while, I'll be tweeting a lot more.  If you're so inclined, you can follow my mostly-trade-related tweets on Twitter at @scottlincicome.

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