How Going Against China’s Currency is Bad for the U.S.

During Monday’s third and final presidential debate, former governor Mitt Romney attacked the Obama administration’s handling of inaccuracies in China’s currency appreciation rate stating that “China has not played by the same rules, in part by holding down artificially the value of their currency.”

Further Romney has stated that during his first day in office he would label China as a currency manipulator which has caused major concerns for U.S. financial analysts. While many analysts do agree that there are some discrepancies in China’s currency value, the Romney plan would cause undo strain on trade agreements between the U.S. and China.

First, in a report by Richard C. Bush III of the Brookings Institution, a Romney decision to go against China’s currency manipulation would create a trade war between the two countries that would result in slower economic growth and unemployment in both countries with increased inflation and higher interest rates in the U.S..

Secondly, the Brookings Institute report shows that the process is not as easy as placing a currency manipulation tag on China and that the two countries would have to enter into negotiations before any designation of currency manipulation can be warranted.

Third, the Brookings Institute report shows that China has the right to refuse to accommodate to U.S. demands, which would require Romney to get approval from Congress for future sanctions. This may put Romney at odds with lobbyist and businesses who rely on China’s manufacturing and assembly plants.

Even within his own party, Romney is facing opposition with labeling China as a currency manipulator. In a report by Alex Leary of the Tampa Bay Times, Florida Senator Marco Rubio voted against a senate bill to label China as a currency manipulator. In the article, Alex Conant, a spokesman for Rubio, stated that “he [Rubio] is against that bill because it sets a trade war into motion with China – a situation that would have detrimental impacts on our economic recovery and job creation in Florida.”

Yet, Romney feels that we are already in a trade war with China and that without this designation we will continue to lose American jobs, claiming that the trade war with China, “it’s a silent one. And they’re winning.”

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