Majority of Senators Want Currency Manipulation Addressed in Future FTAs
Sixty senators sent a letter to U.S. Trade Representative Mike Froman and Treasury Secretary Jack Lew Sept. 23 stating that the Trans-Pacific Partnership and other future free trade agreements should include “strong and enforceable” disciplines against currency manipulation by foreign governments. The bipartisan group, which includes more than a dozen members of the Senate Finance Committee that oversees trade policy, asserted that currency manipulation “can negate or greatly reduce the benefits of a free trade agreement and may have a devastating impact on American companies and workers.” For example, the letter said, a study by the Peterson Institute for International Economics blamed currency manipulation for the loss of one to five million U.S. jobs. Similar arguments were made in a letter sent to President Obama in June by 230 members of the House of Representatives.
House Ways and Means Committee Ranking Member Sander Levin issued a statement applauding the Senate letter, stating that “there is no point in negotiating a TPP agreement to eliminate import duties if countries are allowed to effectively reimpose those duties by manipulating their currencies.” Levin argued that current mechanisms are insufficient to address this problem because the International Monetary Fund “has clear rules on currency manipulation but no effective enforcement mechanism” while the World Trade Organization “has a strong enforcement mechanism but not everyone agrees on what the WTO currency rules mean.”
Legislation to address currency manipulation by foreign countries has been introduced and occasionally advanced in each of the last several Congresses but has never been enacted into law. Most of these bills have been targeted at China based on the claim that Beijing has manipulated the value of its currency, resulting in a growing U.S. trade deficit with China that in turn has led to a decline in domestic employment. The measure currently pending in the House, however, takes a broader approach by pointing out that there are other countries, including some with which the U.S. is engaged in trade liberalization negotiations, that have been guilty of currency manipulation themselves (Japan) or have similar concerns about others engaging in this practice (the European Union).