Free Trade Is a Two-Way Street

Trade isn’t a topic on which I can express all of the relevant arguments, but this suggestion from University of Maryland School of Business Professor Peter Morici sounds reasonable to me:

China is the biggest problem. It subsidizes foreign purchases of its currency, the yuan, more than $460 billion a year, making Chinese products artificially cheap at Wal-Mart. The U.S. trade gap with the Middle Kingdom has swelled to $250 billion. …
As long as China subsidizes the sale of yuan to Wal-Mart and other U.S. importers, the U.S. Treasury should tax dollar-yuan conversions. When China stops manipulating currency markets, the tax would stop. That would reduce imports from and exports to China, create new jobs in the U.S., raise U.S. productivity and workers’ incomes, and reduce the federal deficit.

Free trade has to go both ways. No doubt, there are economic arguments having to do with investment and leverage that support the allowance of manipulated imbalance, but then, once again, I think we’re shifting toward the topic of government’s appropriate behavior as a business entity.

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