Currency Manipulation as Political Football
Wednesday, October 26, 2011
|Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).|
Maybe both the White House and House Republican leaders think that “leadership from behind” worked so well for President Obama in Libya (which may follow dictator Moammar Gadhafi’s rule with a fundamentalist Islamic regime) that they should use the principle elsewhere. At least that’s one possible explanation for the embarrassing Alphonse-Gaston routine they're both putting on in dealing with a bill passed by the Senate October 11 to combat currency manipulation by China and other U.S. trade competitors.
Of course, what’s really happening is that the President on the one hand, and Speaker Boehner and his colleagues on the other, are playing the old Washington games of posturing for the public and embarrassing adversaries in front of key constituencies. But given the nation’s slumping economy and bleak prospects for real recovery, this depressing story of political theatrics is at least as worrisome a sign of disfunctionality in American politics as the recent debt ceiling showdown. And it’s worth reviewing in detail.
What’s now become an orgy of buck-passing began in late September, when the prospect of Senate passage prompted Utah Republican Orrin Hatch to ask the administration for its official position. “Before the Senate moves forward, it's imperative that the 100 members of this body have a full understanding of the administration's views,” wrote Hatch, ranking member of the Finance Committee.
Hatch’s plea also resurrected a key form of punting on this issue that’s shaped the currency manipulation debate for years, asking U.S. Trade Representative Ron Kirk whether the bill complies with World Trade Organization rules. Like most bill opponents, Hatch apparently believes that an international organization numerically dominated by protectionist countries should be able to veto common-sense measures to promote growth and hiring in the still-slumping U.S. economy.
White House spokesman Jay Carney’s response was prompt but devoid of content. “We are reviewing the bill,” he said, even though in various forms the measure has been on debated in the capital since 2005. Nearly one month later, an official “Statement of Administration Policy” is still nowhere to be seen.
On October 3, the Hatch gambit was repeated by House Majority Leader Eric Cantor, who in the process displayed uncharacteristic deference to White House judgment. At a press conference that day, the Virginia Republican emphasized several times that, before making up his own mind, he wanted to hear the administration’s views on the bill’s potential “unintended consequences.”
That same Monday, Carney elaborated on the president’s position, revealing that the administration review of the bill was focusing on determining its consistency “with our international obligations” – the WTO issue.
Twenty four hours later, House Speaker John Boehner was somewhat more forthright than Cantor, calling the Senate bill “pretty dangerous” – a phrase widely taken to represent a decision to block a House vote, even if no such declaration was specified. Indeed, Boehner – perhaps mindful that dozens of House Republicans have co-sponsored that chamber’s companion bill – also retreated into a form of proceduralism, puzzlingly claiming that addressing a major trade policy matter was “well beyond” the responsibilities of the branch of government Constitutionally tasked with regulating foreign commerce.
At the same time, some of Boehner’s rank and file appear to be playing a similar game. Although 63 members of the GOP caucus have now signed onto the legislation, fear of retaliation has deterred any of them from endorsing the discharge position needed to push the measure onto the floor over the leadership’s objections. Yet according to an October 10 report in The Hill, (http://thehill.com/homenews/house/186419-pressure-mounts-on-house-gop-to-vote-on-china-bill), a number of these Republicans are willing to vote for discharge – but only if Obama commits to signing the currency bill.
The Speaker dialed up the rhetoric further at a policy conference in Washington on the sixth, upgrading his characterization of the currency measure from “pretty dangerous” to simply “dangerous” and warning that “You could start a trade war
” at a time of domestic and global economic fragility.
Boehner also chided the White House’s timidity but simultaneously solicited some Executive Branch political cover. “I frankly think that the president agrees with me,” he said, “But why isn't the president speaking up? Is he too busy campaigning? Why isn't he out there making it clear that this is ill conceived? I believe that he agrees with me but he won't say it.” As before, however, the threat to block a vote was understood by many reporters and analysts, but never actually made.
Even as Boehner was speaking, however, Obama revealed a bit more of his hand. At a news conference that morning, the president deftly confirmed bowing to the WTO to be the touchstone of his currency manipulation policy. After actually declaring Beijing guilty of the practice – a position he was happy to take as a presidential candidate in 2008 but dropped upon entering office – Obama made clear that "My main concern ... is whatever tools we put in place, let's make sure that these are tools that can actually work, that they're consistent with our international treaties and obligations.”
Added the President for good measure, “I don't want a situation where we're just passing laws that are symbolic knowing that they're probably not going to be upheld by the World Trade Organization, for example, and then suddenly U.S. companies are subject to a whole bunch of sanctions.”
The President still didn’t explicitly condemn the Senate legislation. He didn’t even explain why he thought the bill might be WTO-illegal. But given the likelihood of a WTO thumbs-down for the measure’s key provision – which designates currency manipulation as a violation of U.S. trade law subject to offset
ting tariffs – the President’s remarks strongly, if reluctantly, hinted at a White House veto.
Cantor didn’t seem to pick up the hint, however. Shortly before the Senate vote on the 11th, he once again sought White House guidance. “I mean, clearly they’ve got concerns as well,” the Majority Leader told reporters. “They have not issued a [statement of administration policy] on something this important; I would think that they would.... I would like to hear from those who are on the frontline of this relationship with China what the concerns are. It would seem to me that it’s a big deal when you’re talking about a trading partner like China, if you do this without the input of the White House.”
Boehner reacted the following day to the Senate move by repeating his trade war warnings – and his request for some White House support. "While the president is out campaigning instead of governing,” he complained to journalists, “it'd be nice for the president of the United States to make clear what his position is on this China currency bill." The Speaker also evidently signed off on a bone thrown to China critics inside and outside his caucus – Ways and Means Chairman Dave Camp’s announcement of hearings on the range of trade and investment barriers in the China market.
Perhaps in response, White House spokesman Carney provided a few more hints of the administration’s anti-Senate bill leanings. He not only reiterated “concerns” about “aspects of the legislation” that may not dovetail “with our international obligations.” He also revealed that “we’re in the process of addressing with Congress those issues. And if this legislation were to advance, we would expect those concerns to be addressed.”
In other words, Carney strongly suggested that the Senate bill is unacceptable as is, and especially the key trade law provision. But he still stopped short of calling for its demise – or even for its passage in modified form.
Another flagrant administration punt, however, was on the way. On Friday, October 14, the Treasury Department announced that publication of its bi-annual report on foreign currency manipulation policies would be postponed beyond its official October 15 release day.
The report, which both the Obama and Bush administrations have used to absolve China in particular of currency manipulation charges, has often been delayed in years past, ostensibly in order to avoid needlessly ruffling China’s feathers before key bilateral or international meetings, and ostensibly to preserve hopes of more progress in resolving such issues. The latest such announcement was true to this form – despite the failure of the aforementioned confabs to create meaningful revaluation pressure on China, and despite the administration’s own acknowledgement that China’s progress is inadequate.
But even though even an official U.S. finding of manipulation has mainly symbolic effects, it was hard to ignore the contrast between the hesitancy of the president’s Treasury Department and the president’s own accusations just the week before.
Over the ensuing week, Boehner seemed to have seen an opportunity to paint the President even more tightly into a corner. An October 22 Dayton (Ohio) Daily News article quoted him as agreeing to “reconsider his decision to hold up [currency] bill if President Obama would agree to sign it into law.” The day of Camp’s Ways and Means hearing, on the 25th, he continued his dual-track strategy – upgrading his assessment of the currency bill yet again from “dangerous” to “very dangerous” but also challenging Obama to “stand up and take a position.” Camp joined in, too, urging the administration to tell Congress what it “should and should not do” to counter China’s predatory currency and other economic policies.
The administration’s witnesses, however, declined the bait. Undersecretary of the Treasury Lael Brainard told legislators that “Aspects of pending legislation ... do raise concerns about consistency with our international obligations and we are discussing these issues with members (lawmakers)" but also stated “I’m reluctant to discuss [any] particular aspect of legislation. The test for us is will we be able to have something effective and consistent with international obligations, and we’re willing to work with members of Congress on that front.” Continuing the exercise in dissembling, Brainard would not say whether the president would veto the current legislation.
With power divided among three branches, America’s political system was never meant to be a model of efficiency. But neither was it supposed to degenerate into kind of cynical and unproductive farce being orchestrated around the currency manipulation bill.
President Obama should spell out his position on the legislation, or at least to specify the WTO problem if he’s opposed. Speaker Boehner should let the House work its will, as he has pledged to do in other contexts, and allow a vote. House Republicans should demand from their leaders the opportunity to do their jobs and legislate on priority public issues like the currency bill. And all of them should take these actions whatever their political allies or opponents say or do – just as if they were elected officials with a modicum of self-respect.
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).