China's currency manipulation helped cause our recession. They have a persistent trade surplus with the U.S. and much of the world, and other countries, of course, have a persistent trade deficit with China. If China's currency floated, the trade balance would, y'know, balance.
Why do free traders tolerate manipulation by foreign governments? Its odd, because those opposing responding to currency manipulation proclaim to be free traders and against government regulation of the economy. Why are they defending foreign government regulation of currency values when there is a perfectly good currency market to be had?
Timothy Geithner cheered us when he said China is a currency manipulator. Obama cheered us when he signed onto the Senate currency manipulation bill in the 110th Congress. They disappointed us by backtracking... Geithner's office calls his prior statement, during the confirmation process, a mistake by a low level staffer in written comments.
Now Geithner is going to China. Will he bring up currency?
Fun facts from Wikipedia.
The Canadian Goods and Services Tax (GST) (French: Taxe sur les produits et services, TPS) is a multi-level value-added tax introduced in Canada on January 1, 1991, by Prime Minister Brian Mulroney and finance minister Michael Wilson. The GST replaced a hidden 13.5% Manufacturers' Sales Tax (MST); Mulroney claimed the GST was implemented because the MST hurt the manufacturing sector's ability to export. The introduction of the GST was very controversial. As of January 1, 2008, the GST currently stands at 5%.
The GST is a value added tax. It is rebated upon export, which is why they did it. Implementation helped exports because the tax is rebated, like an export subsidy. Combined with the provincial goods and services tax, the rate is 13%. (Mexico's VAT is 15% generally).
The funny thing is they enacted it the year NAFTA negotiations began... 1991. Then they lowered tariffs but kept the VAT tariff. We did nothing, but pay the tariff, and compete with the Canadian imports coming in with a VAT rebate.
And how did "socialist" Canada handle the regressivity that liberals complain of?
There is a 5% tax on all products, except certain essentials such as groceries, residential rent, and medical services, and services such as financial services.
The Obama Administration took a good step last week, telling the Senate Finance Committee that it would not be submitting the Panama Free Trade Agreement soon. First, the administration wants to put together a new framework for trade. I don't know what that framework would be, but it is essential to get it right.
Everett Eissenstatt, Asst U.S. Trade Rep for the Americas, told the Senate Finance Committee, on May 22, 2009 (PDF):
The President believes that the United States needs a new framework for trade. He recognizes that trade is essential to America’s prosperity and has the potential to lift up workers in America and around the world. But for it to accomplish this, trade agreements need to include strong labor and environmental standards, we need to do a better job enforcing our trade agreements, and we need domestic policies to help Americans succeed in an increasingly dynamic economy. The President looks forward to outlining this framework in the near future. This Administration is working with Panama to ensure that this Agreement and its implementation fully reflect the values of the President’s vision. At the same time, the Administration wants to make sure that any new trade agreements that are advanced – including with Panama – be part of this broader framework.
The Washington Post article on a "national sales tax", or value added tax, is continuing in blog form, on the paper's website today. E.J. Dionne, a regular op-ed contributor, leads the discussion. There are a lot of comments, worth perusing if this interests you.
Dionne opens the blog string with this:
Lori Montgomery has a very important story in The Post on whether a national sales tax is in our future. The definitive view of such a tax (often it takes the form of a Value Added Tax, or a V.A.T. whose details Lori explains) was offered some years ago by Larry Summers, President Obama’s top economic honcho. Summers said (and I am loosely paraphrasing) that we don’t have a national sales tax because liberals think it is regressive – it hits the less well-off hardest – and conservatives think it would be a money machine for government. We will get a national sales tax, Summers added, when conservatives realize it’s regressive and liberals realize it’s a money machine for government. I have never been wild about a national sales tax or a V.A.T. because I do worry about how regressive such taxes are. (Yes, I’m a liberal that way.) But I am starting to think such a tax may be inevitable because government is going to need a lot of revenue in the coming years. Perhaps I have just proven Summers’ point. What do you make of this debate? Will we get a national sales tax? Should we?
The CPA position on a VAT in relation to trade problems, is here. Senator Lindsay Graham has introduced a trade/VAT related bill that AMTAC supports.
Jerry Hagstrom wrote the following article for CongressDailyPM on May 22, 2009:
In his first major speech to an agriculture group, Trade Representative Kirk told the U.S. Meat Export Federation today that forcing other countries to comply with trade agreements is the best way to get more access for U.S. beef and pork. "One of the best ways we can grow market access for the U.S. meat industry is by enforcement," Kirk said. "Trading partners must play by the rules if we are going to revive our economy as a global community." Kirk did not mention the Panamanian, Colombian or South Korean trade agreements under consideration in Congress. Diverging from his prepared text, Kirk said USTR can get increased access "not just through small deals. We can get you more meaningful access with enforcement." He added: "To make the case to the American people, we have to show that our partners are going to play by the same rules we do."
