By Jim Daws
Wednesday’s announcement that last year’s trade deficit, which came in at a whopping $621b — the largest in over a decade — illustrates the structural dilemma on the horns of which the President and his trade reform team are caught. As Trump’s deregulation and tax cuts supercharged America’s economy, the dollar grew even stronger, making U.S. exports more expensive and foreign imports cheaper – especially those from China, which suffered a significant economic contraction. Despite the Administration’s modest tariffs on some Chinese goods, our economy bled a record $419b to that communist dictatorship.
This devastating news was celebrated by the Resistance media as proof that Trump’s America First trade reforms are failing, ignoring the role our improving economy and strong dollar played in the equation. They mostly ignored, too, U.S. Trade Representative Robert Lighthizer’s announcement that the administration is within days of finalizing a trade reform agreement with China to open their markets to more American exports while protecting our trade secrets and intellectual property. I guess it was lost on the media that the reforms they decried a failure had yet to be implemented.
But reforming China’s trade abuses, while imperative, will not be enough to return American goods and services to global competitiveness. Under any global trade regime, an even a greater obstacle to addressing our balance of trade is the role the strong dollar plays. Simply put, all the market access in the world won’t restore America’s producers if exchange rates make their products too expensive.
Owing to our history as the world’s largest and most stable market, the U.S. dollar is the world’s reserve currency. That means when nation’s trade and conduct financial transactions, they most often pay each other dollar-denominated assets. This foreign demand for American dollars artificially drives up its value thereby raising the price of U.S. goods and services. U.S. exports become prohibitively expensive in foreign markets and relatively cheap imports surge into the American market – devastating our manufacturers, miners, farmers and ranchers. While global financiers reap huge profits from the strong dollar, Main Street, USA has gotten hammered.
One proposal to address the artificially strong dollar is The Competitive Dollar for Jobs and Prosperity Act advocated by the Coalition for a Prosperous America. CPA represents manufacturers, agriculture and labor to rebuild the economic health of middle America that’s been hit so hard by decades of globalism.
The bill would amend the Federal Reserve Act to add a mandate to achieve a balance of trade to its current mandates of full employment and low inflation. It would create an exchange rate management tool for the Fed called a Market Access Charge, to be levied on foreign purchases of American securities, in order to adjust the strength of the dollar. The MAC would be collected by the Treasury and would be moved up or down to gradually to achieve a trade-balancing exchange rate within five years. The legislation would also authorize the Fed to retaliate against nations that manipulate their currencies to gain trade advantages.
CPA says the bill, “…provides the missing tools America needs to defend its industries, workers, farmers, and ranchers from incoming foreign capital that weaponizes the dollar against domestic manufacturers and agricultural producers.”
These measures are not without precedent, in 1985 with the U.S. facing large and growing trade deficits, President Ronald Reagan negotiated the Plaza Accord with the G-5 (then the U.S., Germany, U.K, France, Japan) to depreciate the U.S. dollar by 30 percent. The agreement worked and by 1991, our trade account was balanced. That was the last time any administration bothered to address the dollar exchange rate and we have suffered the consequences as one sector of the U.S. economy after another has been offshored.
The human cost of all this has not only been the loss of tens of millions of good paying, full-time jobs, but also of retirement security and employer-provided health insurance as America’s employers slashed costs trying to compete with low-wage nations.
One thing’s for certain, America cannot continue to rack up these crippling trade deficits indefinitely without eventually sliding into a third-world type economy. We have seen that our trade competitors are willing to manipulate their currencies and engage in predatory trade practices, including targeting whole industries for takeover.
While the President’s opening of China’s export markets is a worthwhile goal, tying our economic well-being to an oppressive communist dictatorship that increasingly challenges us militarily is a fool’s errand. The key to securing a prosperous nation for coming generations of Americans is taking control of our own economic fate and the Competitive Dollar for Jobs and Prosperity Act is one way of doing that.
You can listen to my interview with Michael Stump from the Coalition for a Prosperous America here.The author hosts Right Now with Jim Daws, a webcast on news, politics and culture from and American nationalist perspective – https://twitter.com/RightNowJimDaws