Devaluation in a Free Trade World

A prosperous economy is created via good economic policy and then getting out of the way to let America’s amazing companies and citizens work, produce and invest. The perfect pro-growth agenda includes: a low rate flat tax, spending restraint, sound money, minimal regulation, and free trade.

While bipartisan movement on some of these key pro-growth policy planks is not in the cards in the near-term, we are within striking distance on several major free trade agreements.  Completion of a well negotiated Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, free trade agreements with most of the nations around the Pacific Ocean and the European Union, respectively, would greatly benefit the United States.

The complexity of today’s interconnected global markets sometimes creates challenges for supporters of free trade. Today, currency manipulation is a potent tool of mercantilists, tempting nations to increase their trade balances and export domestic unemployment to the countries that are not devaluing, a “beggar-thy-neighbor” approach to international economics.  Using certain key economic indicators as a test would be an effective way to address currency manipulation in future free trade agreements.