Today, Americans for Tax Reform sent the following letter opposing the “Currency Exchange Rate Oversight Reform Act,” sponsored by Senator Sherrod Brown (D-OH) and Senator Chuck Schumer (D-NY). This bill would raise tariffs on imports from countries labeled currency manipulators with the stated goal of forcing China to allow its currency to appreciate.
While it is tempting to blame China for our ballooning deficit as well as our high unemployment levels, it would not be correct to do so. Recent analysis by Dr. Derek Scissors of the Heritage Foundation has revealed that fluctuation in China’s currency levels have had little to no correlation with changes in our deficit or our unemployment rate. In other words, China’s currency is not the cause of our problems. Rather than addressing these issues, this legislation would create new ones. By increasing tariffs on Chinese imports, and others deemed to have an undervalued currency, this bill could easily spark a trade war, hurting consumers at a time when disposable income is hard to come by. Even if other countries do not retaliate, consumers would face higher prices due to tariffs on imports at a time when inflation is rising and incomes are falling. We cannot afford to let this happen.
To increase our economic growth we should not become a more protectionist country but should increase our economic freedom by passing the president’s free trade agreements with Colombia, Korea and Panama. These agreements would achieve both of the goals of the currency manipulation bill without government intervention; they would create many new jobs and result in lower prices for consumers. According to the White House, passage of the US-Korea free trade agreement would increase U.S. exports by over $10 billion and create 70,000 American jobs. Passage of free trade agreements with Colombia and Panama will open up $4 billion in new markets and the American agricultural industry will see an estimated $1.1 billion dollar overall increase in their exports alone. All three of these agreements have the added benefit of strengthening, not weakening, our diplomatic ties in strategic regions.