Friday, March 9, 2007

Trade Politics by Any Other Name Would Still Smell as ...

. Friday, March 9, 2007

As we shift our attention to exchange rates and trade imbalances, it will be helpful to bear in mind that from the perspective of many (most?) American legislators, exchange rate policy is just another term for "Trade Policy." One illustration of this appeared in the Detroit News today.

"Accusing China of "cheating," Democratic U.S. Sen. Debbie Stabenow of Michigan Wednesday introduced legislation to make it easier for U.S. manufacturers to prove they're being injured by currency manipulation and impose sanctions on guilty foreign competitors.

"Countries like China are cheating, artificially lowering their prices… China and Japan together comprise the top offenders as it relates to currency manipulation," charged Stabenow, who introduced the bill with U.S. Sen. Jim Bunning, R-Ky. Both sit on the Finance Committee that handles trade.

"This practices creates an unfair subsidy for goods in those countries," said Stabenow, who claimed that China can sell an auto part actually valued at $100 for only $60 in the United States "because of the discount they get as the result of currency manipulation."

The House is looking at an identical bill at a time when the Democratic takeover of Congress is casting a huge spotlight on President Bush's trade policies, especially with regard to China. Many lawmakers from manufacturing states blame the loss of 3 million jobs to unfair trading practices by global competitors."

I will spend the six weeks following spring break trying to convince you that this may not be the best way to think about exchange rates and trade imbalances.

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Trade Politics by Any Other Name Would Still Smell as ...
 
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