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Ian Fletcher Headshot

Is Romney for Real on Trade?

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Some good news for once!

Republican presidential candidate Mitt Romney's stand on trade issues, if he truly means what he says and goes the full distance with his published proposals, offers America the best shot at a real and sustained economic recovery that any major officeholder or candidate has yet offered.

His proposals aren't perfect, they aren't consistent, and I have no interest in endorsing the entirety of his economic philosophy, let alone his candidacy. But they are still an order of magnitude more serious about fixing America's catastrophic trade mess than what has been proposed elsewhere.

Like it or not, he's way ahead of Obama on this stuff.

Let's calibrate this by looking at some key excerpts from his campaign website publication entitled "Believe in America: Mitt Romney's Plan for Jobs and Economic Health." [My comments in brackets.]

AN ORDER TO SANCTION CHINA FOR UNFAIR TRADE PRACTICES

"Direct the Department of the Treasury to list China as a currency manipulator in its biannual report and directs the Department of Commerce to assess countervailing duties on Chinese imports if China does not quickly move to float its currency."

[This is big. Currency manipulation is a huge part of China's surplus with the U.S. And to actually mention duties?! That's been unthinkable up to now. Obama certainly hasn't touched it.]

"Of course, opening markets must be a two-way street. For America truly to benefit in global commerce, we need to ensure there is access for our entrepreneurs to sell their high-quality products and services. This means that agreements must protect intellectual property from those who would violate the rules of free enterprise. Too often, trade agreements do not adequately address these concerns. Even when they do, actual enforcement lags."

[Aha! He's figured out that trade agreements on paper don't amount to anything. They have to be enforced, with real sanctions. This is radical.]

"President Obama has also singularly failed in handling commercial relations with China. He came into office with high hopes that displays of American goodwill toward Beijing would lead to better relations across all fronts. Predictably, the goodwill has not been reciprocated; China is driven by its own interests, not by appeals to its sentimentality. Having tried and failed with "engagement," the Obama administration now behaves as if the United States has no leverage in dealing with a country that routinely steals our designs, patents, brands, know-how, and technology..."

[Yup. Time to stop playing by Sermon on the Mount rules with a dictatorship.]

"Chinese companies have simply reverse-engineered American products, with no regard for the patents and other protections of intellectual property rights that are crucial to our own economic well-being. The Chinese government facilitates this behavior by forcing American companies to share proprietary technology as a condition of their doing business in China. A recent study by the U.S. Chamber of Commerce reports that international technology companies consider these practice to be "a blueprint for technology theft on a scale that the world has never seen before."

[Yup again.]

"China's unfair trade practices extend to the country's manipulation of its currency to reduce the price of its products relative to those of competing nations such as ours. While the extent and impact of the manipulation is widely debated, the practice provides an invisible subsidy to Chinese goods sold internationally and an invisible tariff on other nations attempting to sell in China. Despite making gestures to the contrary, China's government often excludes foreign goods from consideration for its government purchases. And it uses a variety of unfair practices--for instance, inventing regulations and standards that only Chinese companies can meet, and artificially lowering costs for Chinese companies-- to tilt the playing field in its favor. Instead of responding forcefully, the Obama administration has acted like a supplicant. Having borrowed hundreds of billions of dollars from Beijing to pay for its agenda, it has placed America in a weak position at the very moment when we need to stand tall."

[Ditto.]

CREATE REAGAN ECONOMIC ZONE

[Unfortunate nomenclature, obviously aimed at Republican primary voters, but the principle here is sound: you can't have free trade with everybody, only those who genuinely accept fair rules of the game.]

"But we can hardly rest there, for there is an opportunity to pursue a game-changing multilateral agreement among like-minded nations genuinely committed to the principles of open markets. As president, Mitt Romney will pursue the formation of a "Reagan Economic Zone." This zone would codify the principles of free trade at the international level and place the issues now hindering trade in services and intellectual property, crucial to American prosperity and that of other developed nations, at the center of the discussion."

"Such a partnership would be extraordinarily attractive to most developed nations, and to those developing nations that have embraced free enterprise and open markets. With membership open to any nation willing to abide by the rules, two primary U.S. objectives would be fulfilled. First, as the most open and innovative economies came together, the dynamism of the resulting economic zone would serve as a powerful magnet, drawing in an expanding circle of countries willing to abide by the rules in exchange for greater access to one another's markets. At the same time, it would also serve as a mechanism for confronting nations that violated trade rules while free-riding on the international system. Creating a large open market, and excluding countries that failed to respect the rule of law, would prevent cheaters from prospering and provide a major incentive for them to reform."

[Yup.]

"We also must resolutely counter efforts by unscrupulous exporters in China and elsewhere to evade the remedial measures we already impose in response to their unfair trade practices. Chinese exporters, for instance, sometimes ship their products to third-party countries and fraudulently declare the products as originating there to avoid remedies that have been imposed on unfairly traded goods. Such practices need to be brought to a swift end. As president, Mitt Romney will allocate the necessary resources to investigating the actual point of origin for suspect products arriving on our shores and impose harsher penalties on those who would circumvent our laws. The return on the increased investment in enforcement would be immediate and substantial."

[Yup.]

"American corporations should not be left in a position in which they are afraid to pursue their interests to the full extent of the law. The Office of the United States Trade Representative (USTR) in a Romney administration will be tasked with pursuing all significant claims of unfair trade practices. It will also take a far more active role in encouraging private firms that have been victimized to raise claims both in U.S. courts and at the WTO. If the USTR can be their advocate in and out of court, American companies and the country as a whole will be in a stronger position."

[Yup.]

IMPOSE TARGETED TARIFFS OR ECONOMIC SANCTIONS

[The "t" word! Gosh! Haven't heard that from anyone but fringe candidates like Trump.]

"Mitt Romney believes we need to consider the use of targeted unilateral and multilateral sanctions. For instance, if the United States identifies a Chinese firm or industry that is relying on unfair practices or misappropriated American technology for its competitive advantage, we should be in a position to impose punitive measures in response. If China makes it a priority to strong-arm Western corporations in industries with particularly valuable technologies, we should join with our allies to ensure that it does not obtain the technology transfers it seeks."

DESIGNATE CHINA A CURRENCY MANIPULATOR AND IMPOSE COUNTERVAILING DUTIES

"Current U.S. law requires that the Department of the Treasury release a biannual review in which it identifies any countries that are manipulating their currency to gain an unfair advantage. The Department of Commerce also has the power to find that Chinese currency policy constitutes an unfair subsidy to Chinese exporters, and to assess countervailing duties on Chinese products. The Obama administration has declined to take either action, effectively accepting China's problematic practices. That acceptance has to end. If China fails to move quickly to bring its currency to fair value, the Department of the Treasury in a Romney administration will designate China a currency manipulator and the Department of Commerce will impose countervailing duties."

[This last sentence, if taken seriously, would amount to the biggest action in defense of America's trade interests since Nixon imposed a 10% tariff in 1971.]

"The United States does not have to accept forever the practices that have led to a huge and seemingly perpetual trade deficit with China. We have opened our economy to China, and China must be persuaded to extend the same privilege to us. China's export-driven economy desperately needs access to our markets and innovations, and we have the leverage to demand that it competes on fair terms in return and provides similar access to its market for U.S. exporters. A Romney administration will work with Congress and our international partners to alter China's behavior. The Reagan Economic Zone will be a key instrument in that effort, offering China an attractive reward for better behavior as an alternative to aggressive responses to continued intransigence."

"The time has to come to lay out a series of steps that China must take to become a responsible member of the global economy. And the time has also come to lay out the consequences that would accompany its failure to make rapid progress toward that end. Despite what the Obama administration appears to believe, the United States is working from a position of strength. Mitt Romney understands that fundamental point and all that follows from it. He will seek to right our trade relationship with China and strengthen our commercial ties with the rest of the world. Nothing less than economic recovery is at stake."

[Yes, Gov. Romney, this is correct. We're never truly going to recover without fixing trade. You seem to be the only candidate who understands that.]

This above is all a very serious package, if it's not ("Hope and Change" anyone?) bluff and fluff designed to be thrown away once in office.

It might well be that, of course, as Mitt Romney is as corporate a candidate as they come, and the Fortune 500's opinion on standing up for the American economy (don't) is no secret. But equally, Romney may be well aware that big business is driving America over a cliff right now, and that somebody is going to have to save American capitalism from itself.

This is well-precedented in American history: it is roughly what both Presidents Roosevelt did, in different ways.

If Romney truly understands the underlying economics of our present trade mess, he knows that the present order is unsustainable. And he--and his backers--probably calculate that they'd rather have a Republican clean it up than a Democrat.

Romney, whose background is that of a serious businessman, not just a front man for business interests like Bush II or Obama, may well understand. (Unlike either of them, he actually knows enough to disagree with his own advisers on this stuff.)

Romney is clearly signalling to the business class that he's not a maniac on these issues. That's why he continues to support the pending trade agreements with Panama, Colombia, and South Korea. These are bad. But if we passed them and seriously implemented the policies Romney talks about above, we'd be infinitely better off than we are now.

Are you for real, Mitt? Give us a sign.