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Trade & Market Legislation
I believe in the ideal of free market capitalism. In a truly free market economy, everyone genuinely benefits. Regrettably, we do not live in a free market world. Foreign governments regulate their markets and create unfair conditions for competition. This is a reality! For that reason, I fervently support a regulated fair trade economy. We must protect industry and jobs domestically, and counter unfair trade practices in this global economy. For national security reasons alone, I believe we must protect industries such as steel and farming. In the event of war, we must have domestic production to support our military and our citizens. Entering a market that does not exist is costly and takes time; therefore we cannot allow foreign governments to undersell us and ultimately make American industry unable to compete, eventually shutting down our domestic production capabilities. We constantly hear rhetoric about free markets and how great it is (and in principle it is) but we cannot compete against one of our largest trading partners (China) because they have a closed economy and undersell us in every good they produce. Let's take a crash course in the global economy: Can one country "undersell" another in all goods? The 'Theory of Comparative Advantage' says no, and prior to World War I, when most of the world was on the "gold standard" (precious metals, mainly gold, were money) it worked, though there could be a temporary imbalance. For example, suppose there are two countries, the Ottoman Empire and Germany. The Ottomans could temporarily undersell Germany in all goods. (Germany would be importing much more from the Ottomans than they would be selling to the Germans - a "negative balance of trade") But very quickly forces would be set in motion that would correct things. Gold would flow from Germany to the Ottoman Empire to pay for Germany's imports. This would cause prices to start rising in the Ottoman Empire (more money in circulation leads to rising prices) and quickly the Ottoman Empire's artificial advantage would be erased. Then for each country exports (of the goods in which it had comparative advantages) would approximately equal imports (of the goods in which others had comparative advantages). Nobody could then "undersell" anyone else in ALL goods. However, balances may be 'permanent' when the world is NOT on gold standard. Today most countries are not on the gold standard - they are on "paper" standards. If Germany is buying (importing) more from the Ottoman Empire than it is selling (exporting) to the Ottomans, then "paper" will flow from Germany to the Ottomans. This means that the currency of Germany is "over-valued" and the currency of the Ottoman Empire is "under-valued". For most countries, the result would be that the exchange rate would change lowering the international value of the Ottoman Empire's currency and raising the value of Germany's, thus solving the imbalance by causing the Ottoman Empire's stuff to become more expensive to people in Germany and Germany's stuff to become less expensive to people in the Ottoman Empire. For the past 30-40 years we (the United States) have been in the position of Germany. We have been importing (buying) much more from foreigners every year than we are exporting (selling) to them. To pay for the excess imports, we churn out dollars and send them abroad. BUT For the last ten or fifteen years (until very recently) the exchange rate (the international value of the dollar) would not fall. So naturally the question is: Why? People in other countries trust the dollar as a safe way to hold their wealth! What is the result? These foreign investors have been holding on to the dollars we churn out so the dollar remains over valued - meaning that other countries can continue to sell more to us than we buy from them (so they "undersell" us in most goods.) So what would happen if foreigners stop wanting to hold US dollars? Well - (generally) they don't actually hold paper dollars - they hold US dollar assets - such as US stocks and bonds. So if people in the rest of the world suddenly wanted out of dollars they would have to sell their dollar assets. This would "correct" the exchange rate and the over valued dollar (meaning that those Hondas, cheap toys, trips to Europe, and cheap Halloween props would then cost much more in dollars). But what would then happen in the stock market? If we look at the value of the dollar, we can understand this a bit more. The US dollar has declined in value this year from what it was in the preceding year against the euro, British sterling and, to a lesser extent, against the Japanese yen. In other words, the US dollar buys less of these currencies than it did last year. But the dollar had NOT lost value against the other Asian currencies, particularly the Chinese renminbi yuan. The reason is that government banks of these countries - particularly China - do not want the dollar to fall against their currencies - if it did, then their goods would be more expensive in US dollar terms and so their exports to the US would fall. To keep this from happening, those government banks - particularly China - absorb the surplus dollars that flow into those countries and then use these dollars to buy US financial assets, which come in the form of US government bonds. When you buy a US government bond, you are loaning the US government money. Thus China keeps its exports high by keeping the value of the dollar high (compared to its own currency) by loaning the surplus dollars it earns (from those exports) back to the US - which helps to finance our current deficit spending. Recently, China has allowed the yuan to rise in value by a mere 2%: From 8.28 yuan per dollar to 8.11 yuan per dollar. Therefore a dollar buys fewer yuan than before - meaning that the dollar fell in value and inversely the yuan rose in value: From 1/8.28 dollars ($.1208 or 12.08 cents per yuan) to 1/8.11 dollars ($.1233 or 12.33 cents per yuan). There is major disagreement about the ramifications for the United States. Basically, those of one side argue that this was merely China's way of trying to soothe US politicians; those of the other side argue that this is only the first step in China gradually abandoning dollars and letting the US sink under the weight of its debts. To me, that possibility is too great a threat and worth fair trade legislation. As a result, I support a strong dollar, and I support subsidies and protectionism to critical U.S. industry like farming and manufacturing. We agree that we should trade freely with open economies, but we must regulate against those that regulate. We must do so to protect out jobs AND our nation. It really doesn't matter how big and powerful your military is if your economy is owned by foreign banks. The Chinese are collecting trillions of dollars in U.S. debt, and all they have to do is liquidate those dollar assets, flooding the world with dollars, to wipe out the U.S. economy. Tanks? Technology? Who cares when you no longer have domestic production of fuel, food, steel, and everything else we rely on because of "free trade?" THEREFORE The result in n America today is that most families are working harder and struggling to get by. Our economy is growing and the productivity of our workers is at an all-time high, but we have been unable to compete, and our wages have failed to keep up with the costs of health care, education and retirement. Globalization, technological change and outdated labor and workplace laws have fundamentally changed our economy and redistributed the benefits of economic growth upwards. Equally fundamental change is needed to ensure our economy once again rewards work.
In Congress, I will insist on pro-worker provisions in new deals, hold trade partners to their commitments, invest more in dislocated workers and communities, and ensure that imports are safe. I believe that the U.S. should not enter any new trade deals that do not meet these tests. I will approach this with three basic principles:
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