Misguided backlash

UP UNTIL NOW IN HIS quarter-century of service in Congress, Sen. Charles E. Schumer (D-N.Y.) had not taken a single official trip overseas. But the danger of a trade war looms so large that Schumer overcame his aversion and went all the way to China this week to warn leaders there that Congress plans to shoot first.

Schumer did not go to make peace. The once reliably sensible Democrat has become a hawkish protectionist. Schumer and Sen. Lindsey Graham (R-S.C.) are pushing legislation that would slap a 27.5% tariff on Chinese imports to the U.S. unless China revalues its currency. The bill is scheduled for a vote next week, and Schumer predicts it will pass easily enough to override a veto by President Bush.

That would be disastrous. The tax would effectively shoot the U.S. in the foot. What degree of infection and disease might follow is hard to predict, but it could be substantial. The American economy would suffer, and such a brazen embrace of protectionism and isolationism would be a diplomatic disaster as well.

Coming off his victory in blocking the Dubai ports deal, where he also led the charge, Schumer appears eager to take advantage of an emotional backlash against globalization. With Chinese President Hu Jintao scheduled to come for a state visit to Washington on April 20, there is every likelihood that Schumer’s Beijing-bashing will gain steam and dash prospects for rational discourse.

Schumer and his fellow protectionists argue that China’s tight control over its currency is unfairly fueling the U.S. trade deficit with China, which topped $200 billion in 2005. They are pressuring the Treasury Department to label China as a “currency manipulator” in a semiannual report due out in April (but now expected to be delayed until after Hu’s visit).

The accusations are overwrought. It’s true that China’s currency does not float freely (a fact Washington was grateful for in the late 1990s) and that if it appreciated sharply, Chinese exports would become pricier. But to pretend that this should be the overriding issue in U.S.-China relations is absurd.

Even if its currency appreciated, China would still be able to produce goods far more cheaply. And if it appreciated significantly, the winners would likely be other suppliers, such as Vietnam or Indonesia, not manufacturers in upstate New York.

The Bush administration has rightly prodded Beijing to float its currency, the yuan, but congressional obsession with the issue, to the exclusion of all other aspects of the relationship, will likely backfire. Beijing does not take well to threats, and Schumer could end up playing into the hands of those communist hard-liners who want to reverse China’s march toward a market economy. Nor does the currency fixation help Washington advance other important matters, ranging from cooperation on nuclear nonproliferation to intellectual property protection.

The economic relationship between the world’s richest nation and its most populous one is extremely positive on the whole -- with Chinese savers underwriting our lavish lifestyle by buying Treasury notes. A capricious 27.5% tariff would surely poison a well we’ve grown to depend on.