Ways and Means Chairman Warns Against Currency Manipulation Legislation
House Ways and Means Committee Chairman Paul Ryan, R-Wis., warned recently about the potential negative effects of enacting legislation designed to combat the deliberate manipulation of currencies by foreign governments to gain a trade advantage. Currency manipulation bills have been introduced in both the House and Senate and there has been speculation that the issue could be used as leverage in the debate over trade promotion authority.
Ryan said that currency manipulation is “a legitimate problem that deserves a real response” but that he objects to the “more confrontational approach” taken by the House and Senate bills, which would trigger higher tariffs on imports from any country believed to be manipulating its currency. “While possibly appealing on its face,” Ryan said, “this approach presents significant problems” and could have the following outcomes.
- the reciprocal levying of tariffs on exports of U.S. goods
- triggering conflicts in response to “innocent currency movements”
- putting the U.S. at risk of being charged with currency manipulation and violation of WTO and other commitments
- exposing the U.S. to litigation challenging its monetary policy
- threatening the U.S. dollar’s standing as the world’s leading currency
- derailing the Trans-Pacific Partnership negotiations by causing the countries involved to “rethink whether the United States is a viable trading partner”
Further, Ryan said, the measures introduced in Congress provide “no real incentive for bad actors to change behavior” and would have much less impact than monetary and domestic fiscal policy.
Instead, Ryan asserted that the “right solution” includes two things. First, Congress should pass a trade promotion authority bill that “would make fighting currency manipulation a primary negotiating objective for all trade agreements.” Second, the U.S. should “put in place more trade agreements” because “a more interconnected global marketplace will have even less tolerance for manipulation.”