Currency manipulation is hot, hot, hot in Washington, D.C. right now. Policymakers on both sides of the aisle (and in both chambers of Congress) agree that a currency provision must be included in the Trans-Pacific Partnership (TPP). That said, not every trade advocate in this town is sold on the idea. On Tuesday, Bloomberg View published an opinion on Congress's so-called "Currency Paranoia." We thought it best to comb through the misguided piece, add some context — and correct a few things.
1: Demons are mythical creatures. Currency manipulation is a fully defined intervention, according to sources no less credible than the IMF, there are 20 known currency manipulators in this global economy.
2: Congressional leaders are joined by actual economists from a range of ideological perspectives making this argument… which, incidentally, is backed by the very real persistence of China’s $342.6 billion goods trade deficit with the United States in 2014.
3: Point of fact: legislation pending before Congress (H.R. 820 and S. 433) would use long-standing, WTO compliant trade laws known as Counterveiling Duties (CVD) to provide relief to specific product lines that receive unfair subsidies from currency manipulation. From your Trade Law 101 class, you may recall that duties are the primary enforcement mechanisms built into the multilateral system enshrined in Uruguay in 1994 that encourages countries to play by the same rules.
4: Economists like C. Fred Bergsten, Art Laffer, and Paul Krugman to name a few.
5: The Federal Reserve's bond-buying program stands in sharp contrast to the purchase of foreign exchange reserves by China, totaling a staggering $4 trillion. If anything, the dollar is overvalued and does little to benefit U.S. exporters. The IMF has set forth clear guidelines for governments to distinguish between legitimate monetary policy and illegitimate currency interventions. The United States, with its massive trade deficits, is in the clear.
6: Instead of speculating, you could read the text of Mr. Levin’s bill.
7: Please support your assertion that including currency manipulation as an actionable subsidy would increase the number of cases filed. Today, there are plenty of reasons to bring a trade case forward. According to the U.S. International Trade Commission, 297 trade cases have been filed since 1977 — 20 cases were filed in 2014 without currency being an actionable subsidy.