Well, duh . . . we don’t have a free trade agreement with China. The problem with the “advocates” (I’m being polite) out there is that they ascribe “free trade” to every problem.
We’ve been down this road before. China has been admitted to the WTO as of the Clinton administration. We can’t raise tariffs on China as a result, and most regulatory barriers would should erect they could appeal to the WTO.
When a country is a member of the WTO, we lose most of our own power over trade policy as a result.
Free trade agreements are merely icing on the cake above and beyond the WTO.
The single smartest thing we could do is withdraw from the WTO and negotiate trade agreements on a bi-lateral basis with individual countries. If we have a good faith partner, then sure, let’s drop all trade barriers. China is not one of those trade partners. By using only bi-lateral and not multi-lateral trade agreements, problems like China’s yuan peg could be dealt with effectively.
As it is, most of the idiotic commentary I’ve seen in the last week on China’s “decision” to “unpeg” the yuan is wishful thinking. The Chinese, with their “surprise” announcement look like they’re “listening” to Geithner, when in fact, their actual currency moves will be rather limited. The Chinese worker is demanding wage increased, which are easily accomplished with inflation or devaluation of the yuan and not with an appreciating yuan.