Lawmakers, economists, manufacturers, and unions agree the TPP should include currency provisions.
Currency manipulation. It’s not new in Washington or in the countries that commonly practice it (cough China cough). That said, it’s receiving a lot of attention as of late.
Why? The president specifically asked for trade promotion authority in his State of the Union address so the administration can complete the hailed Trans-Pacific Partnership (TPP). Republican congressional leadership would like to see the pacific trade deal pass, too. Hey look — bipartisanship!
The problem? The massive trade deal is missing a rule on currency manipulation, which lawmakers from both parties, economists, American manufacturers, and unions have strongly advocated the administration to include.
Former Reagan administration economist Art Laffer writes in Forbes:
Today, currency manipulation is a potent tool of mercantilists, tempting nations to increase their trade balances and export domestic unemployment to the countries that are not devaluing, a “beggar-thy-neighbor” approach to international economics.
House Ways and Means Committee Ranking Member Sander Levin (D-Mich.) laid out a path to resolve this outstanding issue that would lead to support from him and other TPP stakeholders. His proposal would require each TPP nation to “avoid manipulating exchange rates to gain an unfair competitive advantage in international trade.” This provision is consistent with already established, longstanding International Monetary Fund obligations.
But including a currency provision in the TPP is only the first step. Congress and the administration must pass legislation to make currency manipulation an illegal trade practice under U.S. trade laws.
Economist C. Fred Bergsten, an assistant Secretary of the Treasury under President Jimmy Carter, explains the benefits of such a law in Foreign Affairs:
An even better strategy for the United States, whether or not currency manipulation is addressed at least partially in the TPP, would be to implement an effective new currency policy on its own … In fact, it would be superior to including currency in trade agreements because it could be applied to countries outside as well as inside those agreements, such as China and other major manipulators.
The U.S. economy would benefit greatly from these policies, especially the manufacturing sector. Ending global currency manipulation could create 5.8 million jobs over the course of three years, about 40 percent in manufacturing.