New reaction to old problem of a growing trade defict

U.S. Rep. Tim Ryan, a liberal northeastern Ohio Democrat, has joined with Duncan Hunter, a conservative California Republican, to introduce legislation in the U.S. House of Representatives aimed at international currency manipulation, which undercuts the efforts of American companies to compete in world trade.
Ryan, who hails from the Mahoning Valley, and Hunter, who represents eastern San Diego county, have different constituencies, but the same recognition that U.S. competitiveness is being undercut in a number of ways, in this case by trading partners who keep their currency at an artificially low rate. Chief among those countries is China -- the nation with which the United States has the largest single trade deficit by far.
Deficit day
And Ryan and Hunter could not have picked a better day to introduce the Fair Currency Act than Tuesday, the day that the Commerce Department released figures showing that the U.S. trade deficit of 2006 surged to a record high of 764 billion. To be sure, a part of the increase was attributable to increasing energy costs on the world market. The trade deficit with OPEC countries increased from 92.8 billion in 2005 to 104.8 billion in 2006. That's a 13 percent increase, with most of the money going to three countries, Saudi Arabia, Nigeria and Venezuela.
Our trade with China, meanwhile, represented nearly a third of the total deficit in 2006. China purchased 55 billion in goods and services from the United States, while we purchased 287 billion in goods and services from China, a deficit of 232.8 billion. That's an increase of nearly 15 percent over the 2005 deficit of 201.8 billion.
Every year, this newspaper and many others note the trade deficit with a mixture of anger, sadness and wonder.
Trade deficits such as these are unsustainable. The United States cannot continue indefinitely as the world's biggest spender, buying cheap imported goods, fueling the growth of emerging economies and going into hock to do so.
The trade deficit is not unlike the national budget deficit in that we have become a nation that is more used to spending money than making it or saving it.
And there is another ominous connection between the two deficits. The dollars that are flooding overseas to buy cheaper electronics, clothes, machinery, tools and trinkets are being invested by the exporting countries in the U.S. bonds that help underwrite our 9 trillion national debt.
Just one step
The Ryan-Hunter bill is only one important step toward solving an enormous and growing problem. Countries that keep their currencies artificially low, as China does with its yuan, make their products cheaper for consumers in other countries and the products of other countries more expensive for Chinese consumers. Both the House and the Senate should respond. Ohio Sen. George Voinovich was a co-sponsor of the Grassley-Baucus Senate bill on currency manipulation in the last Congress, and Ohio's junior senator, Democrat Sherrod Brown ran his campaign on fair trade issue.
But there are other important ways in which China and other countries manage to make it difficult for the United States to compete on a level playing field.
Free trade advocates are interested only in getting the lowest price today; tomorrow is another day. But unless the United States demands fair trade, and does so soon, it will lose ground. Just being the biggest economy is not enough. An economy must also be healthy. The ever-growing trade deficit will eventually sap the nation's economic health.
In the past, President Bush has been almost dismissive of trade deficits, suggesting that if American consumers did not choose to buy imported goods, there would be no deficit. It is true that American consumers have a responsibility to look beyond the lowest price tag. But only government can take on rapacious trading partners, place tariffs on goods that violate fair trade policies, enact tax policies that encourage rather than discourage domestic production and be aggressive in protecting U.S. trade rights in the World Trade Organization.
It's going to take determination by Congress and the administration to pursue a stronger, fairer, smarter trade policy.