Enforceable disciplines on currency manipulation have returned to the top of Congressional negotiating objectives for the Trans-Pacific Partnership (TPP) free trade agreement (FTA) being negotiated by the United States, Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.
On September 23, 2013, sixty U.S. Senators sent a letter to Treasury Secretary Jack Lew and U.S. Trade Representative (USTR) Michael Froman requesting that the United States include “strong and enforceable foreign currency manipulation disciplines” in TPP and all future FTAs. This follows a similar letter from 230 House members in June 2013. Thus, a majority of members of Congress are now on record demanding currency disciplines in the TPP.
Despite the advanced state of the TPP negotiations, President Obama still has not received “trade promotion authority” (TPA, also known as “fast track” authority), which is traditionally used to obtain Congressional approval for FTAs. Under TPA, Congress agrees to vote on the implementing legislation of a trade agreement without amendment or filibuster. TPA expired in 2007, although the Obama Administration has proceeded to negotiate the proposed TPP as if TPA were in effect. TPA legislation typically includes specific negotiating objectives that members of Congress want the Administration to achieve in any final trade agreement. The House and Senate letters express members’ desire to include enforceable disciplines on undervalued currencies among such negotiating objectives. Secretary Lew and USTR Froman, however, both take the position that, while they view currency manipulation to be a serious issue, they are not planning to address currency disciplines in free trade agreements, including the TPP. Thus far, it has been reported that currency issues have not been seriously discussed in the TPP negotiations.
The Senate letter notes that currency manipulation can negate or greatly reduce the benefits of a free trade agreement. Specifically, undervalued currencies provide unfair trade advantages to foreign producers by making U.S. imports more expensive in that undervalued currency’s home market and by making exports priced in undervalued currencies cheaper than U.S. products in the U.S. and third-country markets. Thus, undervalued currencies can partially or even totally offset tariff reductions negotiated in FTAs such as the TPP, costing American jobs. “Manipulation” refers to a government’s intentional undervaluation of its currency to obtain an unfair competitive advantage for its manufacturers and/or exporters.
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