U.S. automakers see Japan's currency devaluation as boosting Toyota sales in the U.S.
Recently, President Barack Obama welcomed Japanese Prime Minister Shinzo Abe to Washington for high-level talks. One key issue they addressed was Japan’s involvement in a potential Trans-Pacific Partnership (TPP) trade agreement. A major sticking point? Tokyo's recent moves to devalue its currency, the Yen, in order to boost exports.
This currency manipulation has caused concern among U.S. manufacturers, and, as Alliance for American Manufacturing (AAM) President Scott Paul opined in a recent CNBC.com editorial, necessitates a strong hand from Washington:
America – with its massive consumer market and strengthening economy – has a lot at stake in the TPP negotiations. If Japan wants to join in, the U.S. should ensure that currency issues are strongly and clearly addressed with enforceable rules to penalize such action in the future.
Tokyo's currency moves threaten to not only derail TPP talks, however. U.S. carmakers see the weaker Yen as unfairly boosting Toyota's U.S. sales.
Bloomberg News correspondents Keith Naughton and Craig Trudell report that the yen has fallen 17 percent against the dollar since Oct. 31. This currency slide gives Toyota and other Japanese automakers a financial gain on every car. Morgan Stanley estimates the currency boost at $1,500 per car, while Detroit automakers say the correct amount is closer to $5,700 per vehicle.
Ford CEO Joe Hinrichs said, “We’re concerned about what the long-term ramifications are. Our workers and our businesses should not be disadvantaged by governments intervening in currencies.”
Ahead of any TPP, Washington must insist on specific commitments from Tokyo to eliminate currency manipulation. As Paul explained in his CNBC.com op-ed, the Obama Administration's response to date has been inadequate:
Relying on goodwill and promises from our trading partners shouldn’t be enough to pass muster. Either binding commitments – subject to a withdrawal of trade benefits – must be included in the TPP, or the agreement should be shelved...It's not worth sacrificing American jobs and American manufacturing to secure an agreement at any cost.
Last year, AAM joined a broad cross-section of U.S. manufacturers and industrial groups in urging the Obama Administration to include rules governing currency manipulation as a key point of any future trade agreements, including a TPP. Read the full letter calling for action on Japan's currency manipulation.
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