Free Trade, Free Markets: Rating the 112th Congress

June 10, 2013

The 112th U.S. Congress saw renewed action in trade policy but very little initiative. There were 15 individual votes that had an impact on Americans' freedom to trade, whereas the 111th Congress held only three. Despite this increase in attention, the congressional trade agenda during the 112th Congress was largely reactionary to external events, says K. William Watson, a trade policy analyst for the Cato Institute.

The 112th Congress deserves credit for passing three free trade agreements, but only because previous Congresses had worked to block their passage.

  • Between 2003 and 2007 the United States signed 10 free trade agreements with 15 different countries.
  • All of those agreements were approved by Congress, except for three (South Korea, Colombia and Panama), which were held in limbo by congressional leadership who refused to hold a vote.
  • Congress finally implemented those three agreements in 2011, after the administration renegotiated the level of liberalization in certain trade areas.

The 112th Congress also dealt with trade with China. Critics of trade with China complained that the Chinese government suppresses the value of its currency in an effort that amounts to a subsidy on exports and a tax on imports.

  • Advocates of currency sanctions claim that the undervalued Chinese Yuan explains the bilateral U.S. trade deficit with China, which in turn explains persistently high unemployment in the United States.
  • Those relationships, however, are severely exaggerated. In fact, the deficit has increased as the Yuan has appreciated, and employment and the deficit seem to be positively correlated.
  • Higher duties on imports from China to compel currency appreciation would not reduce U.S. unemployment, but would instead raise prices for U.S. consumers, jeopardize U.S. exports to China, and further inflame tensions with a major trading partner.
  • On October 11, 2011, the Senate voted 63-35 for authorizing additional tariffs on imports from China based on its "misaligned currency."

The 2012 elections made no changes to the partisan makeup of Congress and returned President Obama to the White House. Trade policymaking in the 113th Congress is expected to act only on periodic issues that the 112th Congress did not get around to. There will almost certainly be votes on a new farm bill, passage of a miscellaneous tariff bill, further consideration of China's currency and a debate over trade promotion authority.

Source: K. William Watson, "Free Trade, Free Markets: Rating the 112th Congress," Cato Institute, June 4, 2013.

 

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