Washington — A trade group representing Detroit's Big Three automakers on Thursday unveiled a proposal to prevent currency manipulation in a proposed free trade pact.
Automakers, the United Auto Workers union and many members of Congress are making a big push to convince the Obama administration to include in the Trans-Pacific Partnership. The U.S., Japan, Mexico, Canada and eight other nations have been negotiating a Trans-Pacific Partnership that would create a free trade zone accounting for 40 percent of the world’s economy. Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore and Vietnam are also part of the talks.
The American Automotive Policy Council offered a proposal, based on International Monetary Fund commitments already made by all TPP member countries, "will result in a trade pact that ensures that currency manipulation practices by a TPP members do not frustrate the market access commitments set forth in the final agreement," the group said.
"The final TPP agreement must include strong and enforceable currency disciplines that allow markets and not government intervention to set exchange rates," said Matt Blunt, president of AAPC and a former Republican governor from Missouri.
Ford Motor Co. previously circulated a similar proposal in meetings with the Obama administration last fall.
Under the AAPC proposal, manipulation of exchange rates by one of the 12 countries to gain an unfair competitive advantage would be prohibited and if a nation failed to comply, tariffs could be reimposed on the nation.
U.S. automakers want tariffs — 2.5 percent on cars and 25 percent on pickup trucks — to remain in place until Japan demonstrates its market is open. U.S. trade officials have said they will remain in place for a significant period if a deal is reached — but haven't specified precisely how long. They could be in place for 15 to 25 years.
This week, six members of Congress wrote President Barack Obama on Wednesday, urging the White House to include a crackdown on currency manipulation as part of a proposed 12-nation free-trade pact.
Sens. Lindsey Graham, R-S.C., Debbie Stabenow, D-Lansing, and Reps. John Dingell, D-Dearborn, Rick Crawford, R-Ark., Michael Michaud, D-Maine, and Sam Graves, R-Mo., wrote Obama Wednesday urging him to include provisions barring currency manipulation in the proposed Trans-Pacific Partnership.
“An agreement that fails to address foreign currency manipulation could further harm the United States economy by leading to a permanent unfair trade relationship,” the letter said.
Detroit’s Big Three automakers and many members of Congress have been pushing to include provisions to bar central banks from intervening to devalue their currency to make exports cheaper. They worry that Japanese automakers may be able to take advantage of a weaker yen to grow U.S. market share — and argue that one day China could seek to join the free-trade pact — and without addressing currency could devastate U.S. auto production.
Blunt told reporters on a conference call that Japan's current actions would not be prohibited but that the currency proposal would have barred previous Japanese actions and serve to prevent future manipulation.
But Treasury Secretary Jack Lew and U.S. Trade Representative Michael Froman have batted away suggestions that currency should be addressed in the trade deal, arguing that other forums like the G-20 are better suited to handle currency issues. Froman met Wednesday with United Auto Workers President Bob King. Automakers argue other forums aren't working to address currency issues.
Rep. John Dingell, D-Dearborn, said the issue was critical for U.S. jobs. “Currency manipulation distorts trade flows and kills domestic jobs. We need to ensure that any final TPP agreement includes effective and enforceable anti-currency manipulation provisions. This is a life-or-death issue for my hard-working constituents,” Dingell said.
The meeting comes as Congress is considering approving fast-track authority that would allow the Obama administration to get an up or down vote on a trade deal without amendments, something many countries want before they will agree to a trade deal. President Barack Obama held a meeting top trade and economic aides last month to talk about the trade deal.
Japanese automakers argue that U.S. companies aren’t building the cars that Japanese buyers want — and point to market share gains by European automakers in Japan. Japanese automakers still dominate their home market. They also note that Japanese firms have spent billions of dollars to build plants in the U.S. — and wouldn't shift production back to Japan if the agreement is completed.