On China Trade, Paul Ryan Toes the (New, Fake) Company Line

Well, that certainly didn't take long:

In his first remarks touching foreign policy since becoming Mitt Romney's running mate, Paul Ryan had tough words for China in this manufacturing-heavy battleground state.

"They steal our intellectual property rights. They block access to their markets. They manipulate their currency."

He continued, "President Obama promised he would stop these practices. He said he’d go to the mat with China. Instead, they’re treating him like a doormat. We’re not going to let that happen. Mitt Romney and I are going to crackdown on China cheating. We’re going to make sure that trade works for Americans."

Sigh.  Although I'm certainly not a fan of Ryan's comments, they're utterly unsurprising given that China-bashing has been a central plank of Romney's economic platform for almost a year now, and that his new running mate has hardly been a strong and outspoken champion for trade liberalization during his twelve years in Congress.  (Something I acknowledged again last night.)  However, as I noted on Sunday, Rep. Ryan has a pretty good voting record on China trade, having approved Permanent Normal Trade Relations for China back in 2000 (as part of its WTO accession) and, more importantly, opposing a 2010 bill that would have authorized the Department of Commerce to treat "currency manipulation" as a countervailable subsidy - virtually identical to one of the things that Governor Romney promises to do on "Day 1" of his Presidency.

A smart reporter was quick to note this blatant conflict, to which the Romney campaign responded with a classic bit of political non-speak:

The Romney campaign responds that the president already has sufficient authority to act on China's currency manipulation, and a Romney-Ryan administration would do exactly that.

“Like Gov. Romney, Congressman Ryan believes America must take aggressive action to confront nations like China that cheat on trade," says spokesman Brendan Buck. "He believes this can be done most effectively when the president has the freedom to take appropriate action, and that we need a president like Gov. Romney who is committed to doing just that instead one like President Obama who has shown he won’t.”

Umm, yeah, if you can make sense of Mr. Buck's soundbite, please let me know because I certainly can't.  However, because campaign journalists don't understand the basics of US trade law, it appears he got away with it... for now, at least.  That said, I'd be remiss not to counter the paraphrased notion above that President Romney could unilaterally label China a currency manipulator or impose duties on Chinese products on his first day in office.  As I explained back when Romney's big plan first landed:

First... Treasury's assessment and designation of foreign countries as "currency manipulators" is conducted pursuant to US law (22 U.S.C. § 5301-5306), which defines "currency manipulators" as countries that "manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustment or gaining unfair competitive advantage in international trade.” Treasury's assessment must be done in consultation with the IMF and pursuant to pretty strict guidelines. In short, the President can't just tell Treasury to designate a country a "currency manipulator," and he/she certainly can't do it publicly via Executive Order (as Romney's plan promises). To do so would not only violate the letter of the law, but also destroy the Treasury report's credibility.

Second, the President can't just instruct the Commerce Department to begin imposing countervailing duties on Chinese goods. Pursuant to US trade law and regulations, the imposition of countervailing duties on imports requires (i) a petition from an affected industry or self-initiation by Commerce (something that never happens) requesting remedial tariffs on a discrete subset of allegedly subsidized imports; (ii) preliminary and final findings, based on extensive evidence (including rebuttal from Chinese producers, US importers and the Chinese government), of that said imports are being subsidized; and (iii) preliminary and final findings by the non-partisan International Trade Commission that said imports are injuring the US industry. Each of these steps is required by US law and WTO rules. So Romney's plan to, on the very first day of his presidency, just start imposing CVDs on Chinese imports would be in direct conflict with both US law and the United States' WTO obligations.

On the second point, it's also important to note that, even a more subtle approach which simply directed Commerce to begin treating "currency manipulation" as a countervailable subsidy would raise red flags because the Department has repeatedly found that currency policies do not meet the definition of a countervailable subsidy under US law.  (This is why anti-China protectionists have been begging for China currency/CVD legislation for the past several years!)  Now, yes, DOC can theoretically change its policy where it has a reasonable basis to do so, but it is extremely unlikely that "Presidential pressure" would qualify as such (and that still wouldn't obviate some serious WTO concerns).  And, anyway, is the Romney campaign really trying to say that its big China trade plan is to strong-arm the Commerce Department into reversing its longstanding policy of not treating currency undervaluation as a countervailable subsidy?  I doubt it.

But, of course, no one in the press pool or on the Obama campaign will ever get into these thorny issues with the Romney/Ryan team, so this is all just me ranting into the interwebs academic anyway.  And, like I've said a few times now, there are good reasons (Rep. Ryan's pro-trade votes being one of them) to expect that President Romney would, like President Obama before him, ditch the China protectionism the minute he arrived in the Oval Office.

But that doesn't mean I have to sit back and enjoy it.