The July 5 story “Voinovich, Murdough talk tariffs at Step2” [Page 4] shows how unwilling some processors and politicians are to face reality. The World Trade Organization declared that U.S. export subsidies were illegal well over a year ago and Congress — primarily the Senate, which includes Sen. Voinovich — has dithered all this time, despite urging by the Bush administration and various trade groups. I hope Mr. Murdough took the senator to task for his procrastination.
For Voinovich to declare that China's refusal to float the yuan is “unacceptable” is just plain silly. No sovereign country will accept an ultimatum about how to manage its currency. How would the senator go about forcing China to do so? Threaten to raise tariffs on Chinese goods? That would not only be contrary to WTO and other treaties, it would be a repeat of the Smoot-Hawley debacle that precipitated the Great Depression.
In any event, it ain't gonna happen. China will not risk the financial meltdown that would be highly likely to ensue if it floated the yuan. Many economists estimate that nearly half the business loans now outstanding in China are uncollectable. If the yuan were floated, there would almost certainly be an immediate outflow of money into other currencies, which would force the yuan down even further than the present exchange rate. Talk about the Law of Unintended Consequences!
Voinovich and Murdough need to face the reality that China is not the only competitor U.S. business must face. India and Brazil are close behind. Congress needs to level the playing field for U.S. companies by cutting taxes, reforming an out-of-control legal system that enriches trial lawyers unfairly, stopping the micromanagement of employee benefits, privatizing health care and basing regulatory practices on costs vs. benefits. If we just matched these areas of government-imposed costs with those of our nine largest trading partners, which include China, our superior productivity would make us more than competitive.
Roger F. Jones
Franklin International LLC