For the most part it seems the Senate likes to blow smoke when there is little fire to take action. Will this time be different?
Today the Senate voted 79 to 19 to allow Bill S. 1619: Currency Exchange Rate Oversight Reform Act of 2011, to proceed for amendments and a floor vote. The bill is a long overdue measure to provide for identification of misaligned currency. The bill provides a mechanism to require corrective action by the offending currency manipulator nation to correct the currency peg misalignment or face anti-dumping type tariffs. Reuters has a plain English summary of what the bill does. Beyond this cloture vote, the question becomes, will the Senate really do something and pass something to take on China and their flagrant undervaluing of their currency?
Uncle Sam should no longer be Uncle Sucker
The Alliance for American Manufacturing said the above in calling for passage of this bill. America should not be China's export dumping ground. We hear pundits, seemingly statistically disabled, proclaiming the bill will start a trade war. These pundit du jours must have been asleep for the last 11 years. We've already had a neutron bomb exploded upon us by China in trade and we've lost, big time. We didn't have a trade war, we had a trade surrender. Giving multinational corporations and correspondingly China whatever they want, is precisely U.S. policy currently, no matter what it costs Americans economically.
It's so bad the trade deficit with China is on track to break last year's record and even Wall Street gets it that China and the trade deficit are huge problems. The Renminbi is said to be 28% to 40% undervalued.
The bill has blockage in the corporate controlled House of Representatives. The multinational corporation lobby is on high alert, trying to block any action in favor of the U.S. middle class. Seems multinationals are hell bent on offshore outsourcing American jobs, the U.S. manufacturing sector, plus make sure we increase the trade deficit. Like sentinels, lobbyists can be spotted in every corner of those long Congressional marbled halls.
Both the White House and just say no Eric Cantor are being mum on the bill. The code of silence isn't a corporate donor demand, but instead the typical corporate talking points political mouthing spew has been muted by the people's populist rage and anger.
Most Economists who can add praise the bill, including Paul Krugman:
Ask yourself: Why is it so hard to restore full employment? It’s true that the housing bubble has popped, and consumers are saving more than they did a few years ago. But once upon a time America was able to achieve full employment without a housing bubble and with savings rates even higher than we have now. What changed?
The answer is that we used to run much smaller trade deficits. A return to economic health would look much more achievable if we weren’t spending $500 billion more each year on imported goods and services than foreigners spent on our exports.
The bill enables U.S. businesses request tariffs or duties on Chinese imports that directly correlate to China's undervaluation of the Yuan. Bloomberg:
The bill would require the Treasury Department to produce a report twice each year identifying currencies that are significantly undervalued. Governments that are undervaluing their currencies and don’t take corrective action would face penalties including increased dumping duties, a ban on federal procurement in the U.S. and ineligibility to receive financing form the Overseas Private Investment Corporation.
The bill simply makes it easier to slap a tariff on China, but for some goods.