Free Trade

A Washington Pastime: China-Bashing!

Doug Sachtleben - August 13th, 2015

by Andy Roth, VP of Government Affairs

 

After news broke this week that China was devaluing its currency, Sherrod Brown (D-OH), leader of the Senate China-Bashing Caucus*, wasted no time in…well, bashing China:

 

“China will stop at nothing to give its exports an unfair advantage in the global marketplace and this devaluation by the Chinese government is concerning.”

 

Senator Chuck Grassley (R-IA) also chimed in:

 

“China has manipulated its currency for a long time. This is just the latest example, and it’s past the time to do something about it.”

 

Manipulation.  Unfairness.  They’re highly-charged political buzzwords; but let’s step back a bit and examine what’s truly going on.

 

China’s economy has stalled and its government has decided that expanding its monetary supply will help reinvigorate it.  Some people call this “manipulation.”  Other people might call it “quantitative easing.”  That’s right.  The United States manipulates its currency too.  All sovereign governments do.  I would argue that expanding the money supply is not exactly a wise move, but Schumer and Grassley are engaging in some massive pot-calling-the-kettle-black name-calling.

 

So let’s drop that “manipulation” buzzword.

 

By devaluing their currency, China’s exports are now at a competitive advantage to American products.  That’s true, but is it unfair?  Chinese products will compete more easily with some products made by some American companies, potentially harming those companies.  But what about the American companies that use Chinese raw materials or equipment in making their final products?  They would benefit from cheaper imports.  What about American consumers who would benefit from paying less for the Chinese product?  They could use the savings for more spending that boosts the U.S. economy.

 

So, if China’s currency devaluation is unfair, why are politicians like Grassley and Schumer siding with some American companies at the expense of other American companies and American consumers?  Probably because they’re politicians, who like to pick winners and losers for political purposes.

 

So let’s drop that “unfair” buzzword, too.

 

One more thing to think about:  what is a Chinese product and what is an American product?  Global supply chains make it impossible to define that nowadays.  Everyone would agree that the iPhone is an American product, but it’s assembled in China and shipped to the U.S., thus iPhones could become cheaper because of China’s latest monetary decision.  The Toyota Camry is considered a Japanese car, but a lot of Camrys are produced in the United States, and built with a ton of American parts.  In fact, a Camry has so many American parts, it’s consider the Most American car in the market.  Brain. Explosion!

 

So when Schumer, or Grassley, or even The Donald decide to bash China and recommend higher taxes (that’s their solution), you’ll know they are just being politicians who aren’t mindful of the facts.

 

* There is no China-Bashing Caucus, but if there was, Brown would be its leader!

Key Vote Alert – “YES” on Senate Vote on Trade Promotion Authority (HR 2146)

Mr. Andrew Roth - June 22nd, 2015

KEY VOTE ALERT

“YES” on Trade Promotion Authority (HR 2146)

The Club for Growth urges all Senators to vote “YES” on the bill (HR 2146) that authorizes Trade Promotion Authority (TPA).  A clean vote on this is expected this week.  This vote will be included in the Club for Growth’s 2015 Congressional Scorecard.

There’s a lot of controversy surrounding the debate on TPA, but at the end of the day, it is a procedural device that we believe will advance the cause of freer trade and more economic growth.

Our Congressional Scorecard for the 114th Congress provides a comprehensive rating of how well or how poorly each member of Congress supports pro-growth, free-market policies and will be distributed to our members and to the public.

Key Vote Alert – “NO” on TAA Reauthorization (HR 1314)

Mr. Andrew Roth - June 12th, 2015

KEY VOTE ALERT

“NO” on TAA Reauthorization (HR 1314)

The Club for Growth urges all House members to vote “NO” on the bill that reauthorizes Trade Adjustment Assistance (TAA).  A vote on this is expected today as part of the debate on the Trade Act of 2015 (HR 1314).  This vote will be included in the Club for Growth’s 2015 Congressional Scorecard.

TAA is a wasteful welfare program that even some supporters have recognized as ineffective.  It selectively rewards workers who lose their jobs due to trade (a determination that is itself subjective and tenuous) and discriminates against those who lose their job from market forces unrelated to trade.  This makes it a political special interest giveaway.  Worst of all, an analysis commissioned by the Labor Department found that the net benefit to society of TAA was a negative $53,802 per participant.  Any House member committed to rooting out waste in the federal government should vote “NO” on this proposal.

Our Congressional Scorecard for the 114th Congress provides a comprehensive rating of how well or how poorly each member of Congress supports pro-growth, free-market policies and will be distributed to our members and to the public.

Key Vote Alert – “NO” on Adding Ex-Im to the Defense Bill (HR 1735)

Mr. Andrew Roth - June 04th, 2015

KEY VOTE ALERT

“NO” on Adding Ex-Im to the Defense Bill (HR 1735)

The Club for Growth urges all Senators to vote “NO” on any amendment to the National Defense Reauthorization Act (HR 1735) that would reauthorize the Export-Import Bank.  This includes all procedural votes.  If such an amendment passes, the Club for Growth will score against the underlying bill.  This could also include procedural votes that help advance the bill.  These votes will be included in the Club for Growth’s 2015 Congressional Scorecard.

The Export-Import Bank is nothing more than a slush fund for corporate welfare.  It’s also riddled with corruption and graft.  Senators committed to fiscal conservatism and limited government should use all procedural tactics to block consideration of any amendment that reauthorizes the Bank.  Failing that, they should oppose the amendment, and if need be, the underlying bill.

Our Congressional Scorecard for the 114th Congress provides a comprehensive rating of how well or how poorly each member of Congress supports pro-growth, free-market policies and will be distributed to our members and to the public.

What’s TPP, TPA, and TAA?

Mr. Andrew Roth - May 27th, 2015

These acronyms have been in the news lately, so we thought we’d break down the details for you.

The Club for Growth strongly supports free trade.  And while we would prefer immediate multilateral elimination of all tariffs (domestic and abroad), or even unilateral elimination (just domestic), we recognize that politics get in the way of that.  So while they aren’t preferable, the Club typically supports free trade agreements.  Deals like NAFTA, CAFTA, and now the recent Trans-Pacific Partnership (TPP), massively reduce tariffs and other barriers to trade.

When trade agreements become law, the government’s intervention in the free market is reduced.  But in order for this to happen, they have to be negotiated with the foreign countries involved.  Unfortunately, it’s impractical for 535 politicians to be on one side of the negotiating table when working out the various details.

That creates a dilemma.  But luckily there’s a solution.  The Constitution grants the President the authority to negotiate with foreign countries.  It also grants Congress the authority to write laws.  So trade promotion authority (TPA) brings these two things together.  Through TPA, Congress allows the President to negotiate trade agreements as long as he follows certain objections.  In return, Congress promises to hold an up or down vote on the agreements without them getting bogged down with dozens of amendments.

So while TPA isn’t a pro-growth idea, it enables the creation and the ultimate passage of pro-growth trade agreements.

Most Republicans in Congress are for free trade, and therefore, are pro-TPA.  Conversely, most Democrats – beholden to their labor union supporters – are hostile to trade and therefore, TPA.  But some Democrats are willing to support TPA if they get some big government policies out of the deal.  This is where Trade Adjustment Assistance (TAA) comes in.  TAA is a welfare program that provides cash benefits and job training for workers who lose their jobs to free trade.  The labor unions love it.  But the program is so poorly designed and administered – not a surprise for a government agency – that a study commissioned by the Labor Department itself said that it was a negative net benefit to society.

Sometimes TPA, TAA, and even free trade agreements themselves are cobbled together in order to grease the wheels towards passage of all three.  But as standalone policies, it’s clear that TPA enables the passage of pro-growth trade agreements, while TAA is nothing but an anti-growth welfare program that should be terminated.