After years of partisan wrangling that has blocked Congress from taking major steps to boost the flagging economy, Republicans and Democrats finally found something they could agree on last week when they approved long-stalled free-trade agreements with Panama, South Korea and Colombia. It's a big victory for the Obama administration, the U.S. economy (which is expected to benefit from the pacts to the tune of $12 billion a year added to the gross domestic product) and for Congress itself, whose reputation as a do-nothing pack of squabblers has caused its approval ratings to plummet.
But for all the good news on trade, there's a troubling cloud on the horizon: a bill approved in the Senate last week aimed at punishing China for undervaluing its currency. Like the trade pacts, the bill has attracted bipartisan support, yet it's bad for many of the same the reasons the pacts are good.
Throwing up barriers to trade is not a cure for a weak economy; in fact, it tends to make things worse. That's certainly what happened after Congress approved the protectionist Smoot-Hawley Tariff Act in 1930 in a misguided effort to create American jobs. The increased tariffs prompted our trading partners to retaliate against American goods, launching a trade war that worsened the effects of the Depression. The Senate bill directs the U.S. Treasury to raise tariffs against countries with "misaligned currencies" — meaning it's aimed squarely at China.