Schumer ridicules this Wal-Mart effect, and is unconcerned about the obvious body-blow to American consumer living standards. He also claims that both the Treasury and the Federal Reserve support his approach. But a senior Treasury official told me, on deep background, that both government bodies are “firmly and unequivocally opposed” to the Schumer-Graham bill. In fact, last week Alan Greenspan took the nearly unprecedented step of traveling to the Hill to persuade Schumer and Graham to postpone another vote on China tariffs.
The Fed chairman is concerned about Chinese retaliation, and he’s in good company. Investment manager Gene Henssler fears a massive Chinese sell-off of American bonds, one that could abruptly cause U.S. interest rates to spike upward and throw the economy downward. American Enterprise Institute scholar James Glassman believes the stock market would crash. Foreign policy analysts fear a major break in Sino-U.S. relations over Taiwan and North Korea.
Oddly, Schumer claims to be for free trade, and yet he opposes the Caribbean-CAFTA agreement now pending before Congress. Rather than currency protectionism, here his beef is that foreign worker standards are inadequate. He doesn’t get it. When American consumers purchase Caribbean goods, we send dollars to Caribbean nations. Those dollars are then invested in local economies, creating new jobs and higher wages.
I believe economic freedom and growth depends on free trade among nations and individuals in market-based economies. Take away free trade, as Smoot-Hawley did in the 1930s, and depression results. Restore free trade, as presidents Truman through George W. Bush generally have done, and prosperity follows.
Tariffs, on the other hand, are tax hikes on international transactions. Just as domestic tax hikes would sink the economy, so would tariff hikes.
Schumer is using the issue of floating currencies as a smokescreen for his protectionist package against China, just as he’s using worker standards to oppose CAFTA. In both cases he has adopted the new anti-free-trade Democratic party line. But on China and Caribbean trade, the real issue is whether or not the U.S. will be a world leader in promoting political and economic freedom, market-based capitalism, and global prosperity. Free trade is essential to this. It is not only the best course for our own nation and security, but the surest path for the rest of the world.