There’s a good reason for you to keep reading this, even if the words “Chinese currency manipulation” make you zone out a little bit. You see, Mitt Romney seems to have a “thing” for currency manipulation, also called “CM” for short.
Romney has repeatedly promised voters, in stump speeches and interviews across the country, that he will do one thing on his first day in office if he’s elected president. He’s got it all planned out. It isn’t “Obamacare” or immediately convene a meeting with congressional leaders on cutting taxes. No. Romney has his sights set on “CM.”
He said it again during the second presidential debate: “On day one, I will label China a currency manipulator, which will allow me as president to be able to put in place, if necessary, tariffs where I believe that they are taking unfair advantage of our manufacturers.”
The claim is that China undervalues its currency, the yuan, on purpose. If China keeps the yuan’s value low, it can pay less for wages and less for parts. In fact, it can keep the value so low Americans couldn’t possibly compete.
That makes currency manipulation seem obviously unfair and wrong, right? Maybe Romney is onto something here. Actually, he’s about a decade too late.
President George H.W. Bush beat Romney to the “CM” punch in 1992. Then the Clinton administration declared China currency manipulator in ‘93 and ‘94. It made things worse. The yuan didn’t increase in value and wages stayed low. Trade tensions increased. George W. Bush decided to stop pushing the issue altogether.
President Obama is taking a different tack. He has pushed tougher trade policies on a case-by-case basis. Last week, the yuan hit a 19-year high. The non-partisan Peterson Institute for International Economics estimated the yuan was just 7.7% off from its “equilibrium” with the dollar. It was 28.5% off last year.
In other words, as two leading members of the Peterson Institute told the Washington Post, China is far from the “major perpetrator” of CM. That means the United States can compete on fairer footing. That’s a big change Romney should be happy about, right?
So here’s the bigger question, does Romney really need to label China a “currency manipulator” on his very first day of office?
A blogger with the conservative think tank Cato Institute called Romney’s campaign promise a “misplaced obsession.” If Romney realizes he’s wrong on China, he’s going to have a tough time backing off after all of his tough talk for the past year or so.