Senators urge White House to take hard line on currency
Washington — A group of senators on Tuesday issued a new appeal to the Obama administration to take a harder line against countries that manipulate their currency in the wake of China’s move to devalue its money.
U.S. Sen. Debbie Stabenow, D-Lansing, joined Sens. Rob Portman, R-Ohio, Sherrod Brown, D-Ohio, Chuck Grassley, R-Iowa, Richard Burr, R-N.C., Jeff Sessions, R-Ala. and Lindsey Graham, R-S.C. in sending a new letter to U.S. Trade Representative Michael Froman and Treasury Secretary Jack Lew seeking the change.
The push comes as the Obama administration works to finalize the 12-nation Trans-Pacific Partnership trade agreement — including the United States, Japan, Mexico, Canada, Vietnam — that accounts for nearly 40 percent of the world’s economy and a third of its trade. But the issue now has new urgency after China devalued its currency in recent weeks by more than 4 percent.
China is not part of the talks but could opt to apply to join the agreement after it was ratified — as it did with the World Trade Organization.
“In response to China’s actions, Vietnam devalued its currency nearly 1 percent and Korea has since done the same. We do not expect these devaluations to be the last, even in the near-term. We fear these recent currency interventions could lead to a pattern of competitive devaluation within the Asia-Pacific that could hurt US workers and exports for years to come. Therefore, it is extremely important that TPP addresses currency issues in meaningful and concrete ways,” the senators wrote.
“These interventions can have significant and immediate global economic impacts. Thus, currency issues must be addressed seriously, aggressively, and promptly. Recent comments by foreign TPP negotiators to Senate staff members suggest very little progress has been made on this issue.”
In June, Congress gave the White House fast-track authority to negotiate a trade deal. For more than seven years, the U.S., Japan, Mexico, Canada and eight other nations have been negotiating the Trans-Pacific Partnership that would create a free trade zone. Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore and Vietnam are also part of the negotiations.
But those talks have a hit a roadblock over auto issues — including determining the rules of origin for vehicles. Congress gets at least 90 days to review any final agreement before holding an up or down vote without amendments.
The free trade deal could be the single biggest change in global auto production in the last half century. Proponents say it could open more markets to U.S. autos, but critics say it would make it easier to shift production to lower wage countries.
Stabenow noted that “a strong U.S. dollar against a weak foreign currency — particularly one that is artificially weak due to government manipulation — causes foreign products like appliances to be cheaper in Michigan and for Michigan products to be more expensive in countries that manipulate their currencies. When currencies are weak, companies in Michigan make less money while the cost of manufacturing goods goes up.”
Stabenow says currency intervention has resulted in the loss of as many as five million jobs in the United States — including hundreds of thousands of manufacturing-related jobs in Michigan since 2000.
Froman’s office declined to comment. Treasury didn’t immediately return a message seeking comment.
The Treasury Department strongly opposed requiring enforceable currency provisions in a trade deal saying it could kill the trade deal still under negotiation that accounts for 40 percent of the world’s economy.
“Our partners fear that a trade agreement with an enforceable currency discipline could constrain the ability of their monetary authorities to conduct appropriate macroeconomic policies, and that is a risk they are unwilling to take,” Lew said earlier this year. “Seeking enforceable currency provisions would likely derail the conclusion of the TPP given the deep reservations held by our trading partners.”