Senator Webb responds

In the name of journalistic fairness, I am posting Jim Webb's response (via e-mail) to my letter from two weeks ago regarding China and currency policy. While I don't agree with everything he says (I actually do agree with several of his big-picture views, but there are VERY important departures which lead us to dramatically different conclusions), I appreciate that he (or someone in his office) took the time to respond. No word yet from Mark Warner, but I'll similarly post his response if and when I receive one.

Dear Mr. Powers: 

Thank you for contacting my office regarding international trade. I appreciate your taking the time to share your specific views and concerns with me. 

Since entering the Senate, I have worked to ensure U.S. trade policy prioritizes workers' rights at home and abroad, and advances the geopolitical and economic interests of the United States.  I believe that properly constructed trade agreements benefit our country and our workers.  Trade agreements that truly focus on fair trade-as well as free trade-provide consumers with goods and services at more affordable prices, make our exports easier to sell abroad, and promote important foreign policy objectives. 

For example, I have called for a prompt resolution of outstanding issues related to the U.S.-Korea Free Trade Agreement. Passing this agreement will help industries in Virginia and will be a strong affirmation to our ally, the Republic of Korea, and the world of the U.S. commitment to security and prosperity in the Asia Pacific region, open markets, and the rules-based trading system. 

I also strongly support the enforcement of trade laws to combat unfair practices by our nation's trading partners. I have encouraged the U.S. Department of Commerce and the U.S. International Trade Commission to maintain tariffs on imports that are sold at prices that violate trade rules or are unfairly subsidized, damaging industries in Virginia and across the country. I have urged the Office of the U.S. Trade Representative to aggressively defend U.S. economic interests before the World Trade Organization. 

In addition, I am an original cosponsor of the Currency Exchange Rate Oversight Reform Act of 2010 (S. 3134), which provides for meaningful sanctions to be applied to countries, such as China, that manipulate their currency. China's currency is significantly undervalued, severely limiting U.S. exports to China and, most importantly, causing job losses here at home. Experts estimate that an increase in China's currency of 20 percent would decrease the U.S. trade deficit by $50 billion to $120 billion. 

To help workers in Virginia who have lost their jobs due to trade, I have supported petitions for assistance through the Trade Adjustment Assistance program, which provides worker training and other valuable assistance. 

As the U.S. Senate continues to address trade issues, please be assured that your views will be helpful to me and my staff.  I hope that you will continue to share your views with us in the years ahead. 

I would also invite you to visit my website at www.webb.senate.gov for regular updates about my activities and positions on matters that are important to Virginia and our nation. 

Thank you once again for contacting my office. 

Sincerely, 

Jim Webb

United States Senator

The more I read it, the more it comes across as a bit of a form letter, regurgitating his talking points on the catch-all issue of "international trade" without specifically addressing any of my concerns. But so be it. A response is a response, and I'm more than willing to post it here without directly arguing with his points. I'll save that for a different post.

The letter I wrote to my senators

It's been years since I wrote a letter (or even an e-mail) to one of my elected representatives. In fact, the last time I did so had very little to do with government or politics--it was a letter to Sen. Ted Kennedy telling him how disappointed I was that he had caved to political pressure and severed ties with my beloved Owl Club.

So it's no small matter that I chose to break my silence this week, writing a letter to both Virginia senators urging them to vote against legislation aimed at pressuring China to revalue its currency. With the Senate apparently "poised to act" on this bill (I had previously expected them to wait until after the election), I felt that sending both a letter and an e-mail was absolutely vital and urgent.

This bill is government at its worst. It is pure political grandstanding, and it will have incredibly dangerous consequences. My letter honestly could have stretched to 4 or 5 pages with all the complexity of our current relationship with China (and the power that they hold), but I kept it short for our apparently mentally-challenged members of the Senate.

If you've been reading my posts for a while, you already know where I stand. But I think this is one of the most dangerous pieces of legislation to move through our government in many years, and that's saying a lot.

Dear Senator (Webb/Warner),

I am writing to you today to express my strong opposition to current legislation aimed at pressuring China to revalue its currency. The legislation is drawn up on false premises, caters to the whim of the xenophobic, and threatens our nation's economy at a time when it is at its most vulnerable. This bill represents government at its very worst--scapegoating foreign governments for our own problems, to the benefit of politics alone. This political grandstanding is extraordinarily dangerous, and as a result you must vote against passage of these proposed currency sanctions against China.

First, as to the issue of "false premises" mentioned above, I direct you to economist and investment advisor Mish Shedlock, who summarizes the key issues in an admirably accessible manner. He writes, 

"What would happen if China raised prices 20% across the board via an export tax or revaluation of the Yuan, starting tomorrow?

For starters, the Chinese economy would implode overnight along with collapsing exports. U.S. importers such as Wal-Mart, Target, Best Buy, and Kohl's would seek new supply chains from Vietnam, Korea, Singapore, or India, but that would take time. In the meantime, U.S. stores would run out of some goods. U.S. consumers would go on strike until the supply chains were restored. Hundreds of small businesses would go bankrupt. Finally, businesses going bankrupt would pressure the banking system."

This is what we risk so that we can supposedly "save" manufacturing jobs. But this premise is faulty. Manufacturing jobs will return to the United States ONLY IF there is no cheaper alternative. Vietnam, India, and even Germany are currently still better options for our corporations (even despite our rapidly declining dollar), and they will turn there first for their manufacturing labor.

Even if those jobs eventually do return to the United States, it will serve only to increase those corporations' input costs, forcing them to raise consumer prices and feed the inflation that our weak dollar policy has already begun to cause (see the recent rapid increase in commodity prices, from crude oil to corn to oats to gold). For various reasons, inflation always hurts the poorest Americans most, as increases in food costs directly hit their bottom line. Unlike richer Americans, they don't have the option to trade steak for hamburger or organic milk for non-organic milk---they already have done so.

In addition, these "saved" manufacturing jobs will come only at the cost of dock workers unloading ships and truckers hauling goods from the west coast throughout the nation, not to mention the harm done to employees of Wal-Mart, our nation's largest non-government employer. Any projections of a positive jobs impact from this currency revaluation are grossly overoptimistic.

Therefore, AT BEST, the inflation caused by this legislation will perversely do the most harm to the very workers whom it is purporting to help. At worst, this turn toward protectionism will spark an international trade war reminiscent of the Smoot-Hawley Act, which sent the world spiraling deeper into the Great Depression. This is a price that should be deemed far too high to pay for the political "win" that Washington politicians may be seeking during this election season. This legislation must not pass. We must learn the lessons from past generations and refuse to repeat the sins of Smoot-Hawley.

Sincerely,

Evan J. Powers

Hopefully my words will not fall on deaf ears. But either way, I urge you to do something similar. This legislation is just that dangerous. I've also posted below all of my previous rants on the topic. This is not a good situation.

[9/17/10: The Unintended Consequences of Globalization]
[9/23/10: Globalization Issues Heat Up]
[9/30/10: Begun the Trade Wars Have]
[9/30/10: Uh oh... (more from Mish on the trade wars)]
[10/8/10: A Great Summation of the Budding Currency War]