Washington — U.S. Trade Representative Michael Froman said Thursday the Obama administration is not backing away from its position that a 12-nation trade deal shouldn’t include any provisions to prevent currency manipulation.
The White House on Thursday invited reporters to meet with Froman and two cabinet secretaries as the administration makes a concerted push to win agreement from Congress for “fast track” legislation that would allow them to get an up or down vote on a free trade deal under negotiation known as the Trans-Pacific Partnership.
Froman reiterated the administration’s long-standing position that currency issues should not be part of a trade deal. “We want to make sure that we’re taking the most effective way of dealing with the underlying concern.” Froman said.
He argued that the administration has made progress on Chinese currency issues. “We share the concern on currency,” Froman said. “We’ve made progress on these issues. There’s more to go.”
The U.S., Japan, Mexico, Canada and eight other nations have been negotiating the Trans-Pacific Partnership that would create a free trade zone comprising 40 percent of the world's economy for more than four years. Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore and Vietnam are part of the talks.
Labor Secretary Thomas Perez rejected the idea that the administration is “insensitive” to the auto currency issue, when it was noted that the administration publicly hasn’t backed down from its position refusing to discuss currency as part of the trade talks. “We are anything but,” Perez said, noting that President Barack Obama has repeatedly raises the issue of currency in China.
Perez said the administration has been discussing the currency issue on Capitol Hill. “We recognize the importance of this issue and at the same time we want to do something — if anything — that builds upon the progress that we have already made but also doesn’t have unintended consequences,” Perez said. “I would simply respectfully take issue with the notion that no one has given ground on this because this continues to be the topic of significant dialogue with folks on the Hill.”
Michigan members of Congress, Detroit’s Big Three automakers and the United Auto Workers have been pushing for at least three years to convince the Obama administration to include provisions in the agreement barring the countries from currency manipulation, but Treasury Secretary Jacob Lew and Froman have repeatedly shown no interest in doing so, arguing such issues are better addressed by global forums like the World Trade Organization.
Automakers worry that foreign governments like Japan’s will be able to weaken their currency to undercut U.S. vehicle production.
The U.S. auto industry is worried a deal will be reached that doesn't do enough to open the Japanese auto sector to American products. Japan has historically imported very few foreign automobiles. The auto sector accounts for more than 70 percent of the U.S. trade deficit with Japan. “Right now Japanese cars are abundant in America. American cars are virtually nonexistent in Japan — and when you talk about that, you talk about opportunity,” Perez said.
American automakers fear if Japan intervenes to weaken its currency, its automakers eventually will be able to dramatically undercut them, especially when U.S. tariffs are phased out — 25 percent on light trucks and 2.5 percent on cars. Automakers want the tariffs kept in place for at least 25 years or more. And China could seek to enter the free trade agreement under the same rules down the road.
Froman again said that international agreements and the Treasury Department are in a better position to address currency issues. Treasury Secretary Jack Lew met with members of the House Ways and Means Committee on Wednesday to talk about fast track trade legislation.
Perez said it was important to “bake these labor and environmental protections into the DNA of these agreements.” But the administration doesn’t feel the same way about currency issues.
U.S. Commerce Secretary Penny Pritzker said the TPP agreement would be “an open architecture.” Countries in the future could join the agreement if they lived up to the same rules. Froman noted at least six other countries are interested in joining. “That’s what so significant about this: It’s about what is trading going to look like in the 21st century. This isn’t just about the next five or 10 years.”
Perez said that under current rules automakers won’t be able to export autos as easily to many of the growth countries. But he acknowledged labor problems. “Is it going to transform Vietnam into Massachusetts or Maryland in terms of the quality of their worker protections? No ... but will it make it meaningfully better for workers over there and by extension for workers at home. I think we can do that.”