To save and create jobs, Congress should address currency manipulation

Trade has become one of the most hotly debated issues of 2015, and with good reason. Too often, trade is one of those issues discussed in boardrooms, on business pages and union offices. While the topic of trade hasn’t always touched the every day lives of Americans, trade’s impacts definitely have. With a growing sense of awareness about how to properly negotiate trade agreements among the public, it is time for our leaders to take note and implement policies that create American jobs and reward America’s innovative spirit. 

The truth is, when international trade is done properly, America reaps the benefits. However, as I stated in my book, Blue Collar Conservatives, last year, “I am a free trader, but we have to look at the effect of free trade on the average person. Are importers following the same rules that govern domestic manufacturers? Are existing trade laws fair and properly enforced?” 

{mosads}And therein lies the rub. American companies are the best and brightest in the world. We’ve proven that, when competing on a level playing field, we’ll hang with the world’s best and in more cases than not, we will excel. But when other countries manipulate their currency, American manufacturers are in a lose-lose situation. When you’re competing against a country that is continually moving the goalposts, it is increasingly difficult to put points on the board. 

There is a lot of misinformation about currency manipulation, but here are the facts. When countries like China and Japan purchase U.S. dollars they decrease the value of their own currencies, thereby making it harder for United States businesses to export our products. And Chinese and Japanese exports become less expensive compared with American goods. Hence, American-made products become less competitive on the market, and all because foreign government chose to manipulate the value of their currencies. 

The effects of currency manipulation on American jobs are devastating. A recent study from Dr. Arthur Laffer, a top economic advisor to President Ronald Reagan, found that: 

·      Persistent currency undervaluation has benefitted the currency manipulators at the expense of countries allowing the flexible adjustment of exchange rates;

·      The impact of currency manipulation has potentially dampened the U.S. current account by about 4 percent of GDP; and

·      It is likely that millions of jobs in the U.S. were lost as a result of current account imbalances that were generated, in part, by currency manipulation. 

In addition, the Peterson Institute for International Economics concluded that as many as 5 million U.S. jobs have been lost due to currency manipulation.  

The bottom line is governments should not set currency exchange rates, markets should. As negotiators hammer out the details in the Trans-Pacific Partnership (TPP), they should include very specific and enforceable parameters regarding currency manipulation. Any trade deal without such language is hardly a deal for the U.S. 

By taking such steps, the benefits of trade based on open and free markets are preserved and millions more U.S. jobs could be created. 

I have said before that we need to be the party of the worker; we need to be a movement that says, “We want to make things in America.” This transcends parties and politics. Leaders from both sides of the aisle have called for action on currency manipulation. Now is the time to fix the problem.

Santorum served in the Senate from 1995 to 2007. He is chairman of Patriot Voices and author of Blue Collar Conservatives.