Last week's passage by the House Ways and Means Committee of a bill to fight currency manipulation by China and other U.S. trade competitors really does justify adjectives like "epochal" and "landmark" and "milestone."
Not since the 1988 trade act, which notably mandated the use of new mechanisms to counter perceived unfair foreign trade practices, has Congress acted so vigorously to defend the legitimate interests of the U.S. economy's productive core. And not since the ongoing economic and financial crisis broke out have lawmakers moved so decisively to replace the nation's disastrous borrowing- and spending-based economic strategy with one grounded in producing and earning.
The currency bill declares foreign policies that keep currencies artificially cheap — pricing U.S.-made goods out of global markets in the process — to be subsidies that can justify compensatory tariffs for victimized U.S. industries.
It's anything but a done deal. Full House approval this week looks assured, given the Democratic leadership's endorsement and the co-sponsorship of 44 Republicans as of late last week. In addition, its provisions — especially those that opponents charge break international trade rules — could be watered down at the behest of an administration plainly nervous about any boat-rocking in Sino-American relations.
Moreover, the bill must pass the Senate en route to the president's desk, raising the specter of further and possibly fatal dilution or outright rejection — as that chamber has long been less sensitive than the House to the economic damage caused by conventional trade liberalization and expansion.
Worse, with Congress' recess looming, any Senate action this year on an existing counterpart bill looks far-fetched, unless Congress calls a postelection lame-duck session. And despite the currency bill's significant Republican support, a GOP takeover of either congressional chamber could kill its chances next year, as senior Republican leaders still seem strongly opposed. (Rep. Dave Camp of Michigan, the ranking Republican on the Ways and Means Committee and the likely chairman in a Republican House, is a critical exception.)
At the same time, the punishing economic forces that have propelled the currency bill to the brink of House approval could well produce final passage even if Republicans win big in November. Washington is running out of standard macroeconomic stimulus tools, meaning that the economy could still be weak enough and unemployment high enough to make the currency bill's appeal thoroughly bipartisan in the coming months.
Opponents of the bill will whine about the rise of ugly, xenophobic scapegoating, but the real explanation will lie elsewhere. A still-wheezing economy next year is likely to prompt ever more increasingly out-of-the-box thinking about recovery strategies. Therefore, few options will look more attractive than one that can boost domestic growth and hiring without increasing the federal budget deficit a penny by substituting U.S.-made goods for imports on the nation's shopping lists. In fact, the resulting new orders for domestically produced goods — and greater demand for workers to turn them out — should shrink budget deficits by expanding the country's tax base.
The World Trade Organization stands as a final, and probably fatal, obstacle to the currency bill's survival. Supporters have worked overtime to bring it in line with the WTO's rules and rulings, in part to satisfy a stated Obama administration concern. But all are chasing a will-o-the-wisp.
Contrary to what even many trade policy critics assume, the WTO is not mainly a legal institution. It is as political as a Chicago aldermen's conclave. And for most WTO members, which have grown mainly by racking up huge trade surpluses with the United States, keeping the American market much wider open to trade than their own is their top WTO priority.
When, as is almost inevitable, the WTO strikes down the currency bill, Americans will face a fundamental choice. Is it more important to prop up a global trade kangaroo court, or to persist with common-sense steps to restore healthy balances to the U.S. and world economies?
Nonetheless, Washington must realize that the currency bill is no panacea for the U.S. economic ills or even for the nation's trade policy failures. For currency manipulation is far from the only predatory foreign trade practice undermining U.S. recovery and distorting the world economy. And more effective responses to individual instances of foreign protectionism are far from the only changes needed in American trade policy.
So currency bill supporters — and the entire nation — should celebrate the measure's impending passage. What they mustn't do is rest on their laurels.
• Alan Tonelson is a research fellow at the U.S. Business and Industry Council, a national business organization whose nearly 2,000 members are mainly small- and medium-sized domestic manufacturers. Author of "The Race to the Bottom," Mr. Tonelson also is a contributor to the council's Web site: www.AmericanEconomicAlert.org.
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