156 Members of Congress Call for Currency Manipulation to Be Addressed in Trans-Pacific Partnership
As President Barack Obama met with China’s President Xi Jinping last Friday and as negotiators and trade ministers from the 12 Trans-Pacific Partnership (TPP) countries converge on Atlanta this week to potentially finalize the trade pact, a letter signed by 156 members of Congress made a bipartisan case for the Obama administration to include measures addressing currency manipulation in the trade pact.
Noting that three U.S. trading partners have taken steps to manipulate their currencies in the last month alone, the letter urges the administration to take action on the issue.
The letter includes signatures of 21 Republicans and six members who supported Trade Promotional Authority (TPA), or fast track, a measure that would have allowed the administration to bring free trade agreements to Congress for an up or down vote and without amendments.
“In just the last month, three of our trading partners – China, Korea, and Vietnam – have each taken steps that have caused their currencies to weaken, disadvantaging American businesses,” the letter noted. “As you work to conclude negotiations of the Trans-Pacific Partnership (TPP) and pursue the principal negotiating objective on unfair currency practices, we urge you to incorporate strong and enforceable currency rules within TPP.”
Exchange rates have a significant impact on trade, the letter noted, quoting former Federal Reserve chairman Paul Volcker who said, “trade flows are affected more by ten minutes of movement in the currency markets than by ten years of (even successful) negotiations.”
“Currency manipulation to undervalue exchange rates provides an unfair advantage for foreign competitors seeking to sell goods in U.S. markets,” the congressional letter went on to say, “and puts U.S. businesses and workers at a disadvantage when selling our goods in foreign markets.”
The charters World Trade Organization and the International Monetary Fund both contain anti-manipulation provisions, the letter noted, but, the congress members argued, “the WTO commitment is considered too vague for a country to pursue a dispute,” and the IMF “lacks an enforcement mechanism.”
“Our ultimate aim is to establish a clear and enforceable currency manipulation discipline,” the letter concluded. “The TPP is the best opportunity to achieve such a discipline.”
Following the meeting of Presidents Obama and Xi on Friday, the White House issued a statement, which, as it relates to currency, said: “China recognizes the importance to successful RMB internationalization of meeting the transparency standards of other major reserve currencies. The United States supports China’s commitment to implement further financial and capital market reforms, and accordingly the United States reiterates its support for the inclusion of the RMB in the SDR basket provided the currency meets the IMF’s existing criteria in its SDR review.” SDR, or Special Drawing Rights, is an international reserve asset implemented by the International Monetary Fund.