Over the past two days, Congress has done the best it can to initiate a trade war with China. Under the auspices of home grown patriotism and protecting U.S. businesses from big, mean, cheap imports, both the House and Senate passed legislation to apply “countervailing duties” on goods from countries like China and Vietnam. Of course, this was after a court decision declared exactly these actions illegal.
Instead of leveling the playing field as intended, these actions mean higher costs for consumers and could threaten our relationship with one of our best export customers, a move that could do damage to many U.S. businesses and destabilize our economic recovery. Read NTU’s vote alert here for more information.
Despite how fraught with bad economic theory and worse historical examples this kind of trade legislation can be, the anti-China rhetoric can be very difficult to vote against. That’s why the 39 brave legislators who did vote “No” on H.R. 4105 deserve a big “Thank You!”
Here’s the list:
Rep. Justin Amash (R-MI), Rep. Michelle Bachmann (R-MN), Rep. Paul Broun (R-GA), Rep. Michael Burgess R-TX), Rep. Francisco Canseco (R-TX), Rep. Jason Chaffetz (R-UT), Rep. Jeff Duncan (R-SC), Rep. Stephen Fincher (R-TN), Rep. Jeff Flake (R-AZ), Rep. John Fleming (R-LA), Rep. Trent Franks (R-AZ), Rep. Cory Gardner (R-CO), Rep. Scott Garrett (R-NJ), Rep. Paul Gosar (R-AZ), Rep. Tom Graves (R-GA), Rep. Ralph Hall (R-TX), Rep. Andy Harris (R-MD), Rep. Jeb Hensarling (R-TX), Rep. Tim Huelskamp (R-KS), Rep. Jim Jordan (R-OH), Rep. Jack Kingston (R-GA), Rep. Doug Lamborn (R-CO), Rep. Leonard Lance (R-NJ), Rep. Connie Mack (R-FL), Rep. Tom McClintock (R-CA), Rep. Mick Mulvaney (R-SC), Rep. Richard Nugent (R-FL), Rep. Steve Pearce (R-NM), Rep. Mike Pompeo (R-KS), Rep. Ben Quayle (R-AZ), Rep. Steve Scalise (R-LA), Rep. Jean Schmidt (R-OH), Rep. David Schweikert (R-AZ), Rep. Tim Scott (R-SC), Rep. Steve Southerland (R-FL), Rep. Cliff Stearns (R-FL), Rep. Joe Walsh (R-IL), Rep. Kevin Yoder (R-KS)
You can quickly contact these legislators to send a quick thank you here.
Though it can be daunting to take a stand like this during an election year, especially in light of the deep pockets of H.R. 4105 boosters, it is disappointing that more legislators did not stand up to this bad trade policy.
Econ blogger extraordinaire (and visiting scholar at AEI) Dr. Mark Perry has kept a steady eye on trade relations with China over the past several years and makes some good points that don’t often make it into the usual “China is going to drown us all in cheap plastic trinkets” conversation. Perry points out that despite constant worries about our trade deficit with China, China is one of the best markets in the world for U.S. goods. In fact, American exports to China have increased 21% every year since 2005 as the growing Chinese middle class has more disposable income for U.S. goods. At the same time, imports have grown only about half as much. To antagonize a trading partner like China means risking an enormous and growing market for the U.S.
Perry also does an excellent job of dispelling the myths regarding China’s well-known currency manipulation. While government and manufacturers are quick to cry foul over this Chinese government subsidy, Perry explains that in reality, this “manipulation” is really a gift from China to our advantage:1. China's currency manipulation is a form of foreign aid, and to the direct advantage of millions of U.S. consumers, especially the poor and low-income groups, and to the direct advantage of thousands of American companies buying inputs from China.
2. Forcing China to revalue its currency would benefit some American manufacturers competing with China, but would significantly harm those American consumers and businesses currently buying undervalued imports. On net, there would be more harm to American consumers than benefits to American manufacturers, making the country worse off.
3. Like other forms of mercantilism and protectionism, revaluing China’s currency would favor certain domestic producers over millions of consumers, but would make the U.S. worse off, not better off, on net.
4. Finally, instead of complaining, we should be thankful for China's foreign aid to Americans through an undervalued currency, overvalued dollar, and undervalued goods that save Americans billions of dollars every year.
Read the whole thing here.