NTU urges all Senators to vote “NO” on themotion to invoke cloture on S. 1619, the “Currency Exchange Rate OversightReform Act of 2011.” This bill, which seeks to identify and raise tariffs oncurrency manipulators in the name of job creation, is doomed to backfire, therebythreatening higher prices for consumers and a costly trade war with China.
Acareful analysis of the history of China’s currency valuation does notdemonstrate a conclusively dramatic effect on the U.S. trade deficit. Thissignals that American consumption of Chinese goods is relatively inelastic,meaning that attempts to force currency appreciation could lead to higher pricesfor U.S. consumers at a time when they can least afford them.
S.1619 also does not pay sufficient heed to the positive domestic impact oftrade. Lower-priced imports allow American taxpayers to stretch their paychecksfurther than they otherwise could. Moreover, any relative savings can be putback into the U.S. economy through the purchase of American-made goods or expandingthe capital structure through investment. Finally, because a significantpercentage of the value of exports comes from components and raw materialsproduced in the U.S., raising tariffs would end up penalizing American workers.
Ratherthan pursue statist and protectionist measures, Washington should focus onreducing the regulatory burden, paving the way toward domestic energyproduction, and pursuing fundamental tax reform as a way to increase thecompetitiveness of American products on the world stage. Roll call votes on the motion to invoke cloture on S. 1619 will be significantlyweighted in our annual Rating of Congress, and a “NO” vote will be consideredthe pro-taxpayer position.
If you have any questions, please contact NTU Federal Government Affairs Manager Brandon Greife at(703) 683-5700