Most of the information I present here is from an op-ed in today's WSJ. It says the Senate may vote as early as this week on this legislation, which essentially is protectionism. It would allow US companies to request relief in the form of tariffs on a foreign competitor if the exchange rate is being unfairly manipulated. The Smoot-Hawley bill in the 1930s was an across the board increase in tariffs, this one is more selective. It sounds great to protect American jobs against currency manipulation, but there are unintended consequences to such actions. And this legislation allows for more picking of winners and losers for political rather than economic reasons, which opens the door to corruption. Primarily this bill is aimed at the Chinese, who are no doubt going to retaliate if we take protectionist actions against them. Protectionism has a way of spreading, to the detriment of everyone involved. If you wanted to increase the chances for a world-wide recession/depression, this is an excellent way to do it. Much has been made of China's efforts to hold down the value of their currency (yuan), but in fact the yuan has appreciated almost 30% since the middle of 2005. There are other economic forces at work besides the exchange rate, since our trade deficit with them is still high. And wages are rising there and in other developing countries, as are shipping costs to bring products here. Things are beginning to even out a little bit, and we should avoid getting the gov't involved in making such decisions unless there are clear cases of unfair practices from foreign competitors and countries. This bill is a bad idea. But the democrats in the Senate are pushing it to appease the unions in return for voting for the free trade agreements with Columbia, Panama, and South Korea that Obama finally sent to the Congress. They are afraid of losing the Senate to the GOP, ditto the WH, who so far hasn't spoken out against the bill. And the repubs in the Senate won't block it either because Mitt Romney (the current frontrunner) has called for unilateral trade duties against China, in an effort to get himself elected. No telling what the GOP-controlled House will do, but I think they'll pass it too if they get the free trade agreements through as part of a deal. Protectionism is the populist thing to do in an eletion year, don't be surprised if this thing is enacted.