Gov. Mitt Romney is playing an uncharacteristic game of populist nonsense with his vow to declare China a “currency manipulator” on Day One of his administration.
Most American business leaders, whom this is designed to benefit, oppose the move and know it’s garbage as economic policy. The outrage is, with his knowledge of business and international finance, Romney realizes it’s garbage too. And yet, to gain votes, he holds out the promise of something that he knows will do little at best to aid the U.S. economy and that risks great harm.
What’s worse, the rhetoric appeals to some of voters’ worst instincts, tapping into xenophobia to help spur enthusiasm for Romney’s candidacy.
China’s manipulation of its currency, valuing it at an artificially low level to make its exports cheaper and ours more expensive, is a real and serious issue. It costs American jobs – though it also makes Chinese goods sold in the United States cheaper. But hey, I’ve never seen anything labeled as “Made in China,” have you?
Yes, that’s a joke.
But Romney’s idea is all wrong.
First of all, don’t be deceived. If Romney declares China a currency manipulator, exactly nothing happens. Negotiations over China’s manipulation of its currency, the renminbi, begin. But there already are negotiations over China’s manipulation of the renminbi.
Supposedly, if Romney is dissatisfied with the result of the talks, he can start to assess tariffs on Chinese goods. So get ready to pay more for the iPhone 6, whenever it comes out, and for your kids’ Christmas 2013 gifts.
Sorry, I didn’t mean to scare you. Actually, it’s not clear that any tariffs will go into effect ever, since they will be challenged at the World Trade Organization and then years of litigation will begin.
What Romney certainly will be achieving is a slap in the face of a country where “loss of face” is taken very seriously. Particularly now, as China is installing a new leadership that has to show it can’t be messed with.
The Chinese actually have been slowly reducing the manipulation of their currency at a rate they think suitable for their economy, where a sudden change in the renminbi’s value can have bad ramifications. They are not going to make big changes that will have a significant impact on U.S. jobs just because of U.S. pressure. What they might do, though it’s also unlikely, is smack some tariffs on our goods and start a trade war, which would be a disaster for both sides.
What would happen for sure, though, is that Romney will get off to a terrible start with our most significant partner – and adversary – in the world. China will be uncooperative on issues where we need its help, and more adversarial than it otherwise would have been on issues where we disagree.
Plus, having already played a card against the Chinese, Romney will have less leverage in other areas, like human rights and combatting Chinese expansionism. That would be fine if we were going to benefit from the trade manipulation designation. But we won’t.
On this issue, Obama is being more responsible than Romney. Romney should be ashamed of his rank populism. And, I suspect, he probably is.