From Mitt Romney's blog a couple days ago:
We're going to open up new markets for our goods and expand our reach into other parts of the world where other nations are now competing. I want to make sure our goods can go throughout the world. But I also want to make sure that if a nation cheats like China has cheated, we call them on the carpet and don't let it continue. And the cheating takes on a lot of different dimensions. I mean, cheating occurs if you hold down your currency. You might wonder, what in the world has that got to do with jobs here? Let me tell you: When China manipulates their currency by holding down the value of their currency compared to ours, what it does is makes their products in this country artificially cheap. And that then drives American manufacturers and American producers out of business and kills jobs. The President's had the chance year after year to label China a currency manipulator, but he hasn't done so. And I will label China the currency manipulator they are on the first day.
The Romney campaign is also running television ads along these lines.
Now, I know I shouldn't take campaign rhetoric too seriously. But just like judges, politicians (usually) choose their words carefully, and I find many of the word choices interesting.
First off, the main allegation here is that China is "cheating." But in what sense are they cheating? Are they breaking some international trade rules? Well, if they are, we should file a complaint against them. Why isn't a complaint the focus, rather than this domestic "labelling China a currency manipulator" procedure (which I'm not sure would accomplish much)?
Perhaps the trade rules are too vague, as some have suggested, in which case a complaint won't help. If that's the case, though, then shouldn't we try to get some rules in this area? This has been pushed by some, but I haven't seen the U.S. government pursue it. Would Romney pursue it? If not, why not? In order to determine whether someone is "cheating," don't we need some objective rules to examine? We have that with subsidies (more on that later). Why not with currency practices?
I also found it interesting that Romney doesn't accuse China of being "protectionist". Why not? Is it because we are protectionist, too? Or is it because most people don't see "protectionism" as a bad thing? Is "cheating" the preferred term because it is more negative, and because surely we wouldn't cheat?
One other thing that surprises me is why "manipulation" is such a focus here. Doesn't everybody manipulate their currency? Why is that word so prominent?
Finally, it's interesting that not too long after Romney's attacks on this issue, USTR has (today) announced a new WTO complaint against Chinese subsidies to the auto industry. Do these subsidies also constitute "cheating"? Not long ago, USTR announced a challenge to Chinese CVD actions against U.S. subsidies to the auto industry (the auto bailout). So, we have subsidies, too. Do our subsidies constitute "cheating"?
I'd love to see a clearer political debate about what's going on here, but I'm not holding my breath. What is China doing on these matters? What is the United States doing? How are they different? What types of government actions are we -- and should we be -- targeting?
