No Discussion of Currency Rules in TPP Negotiations to Date, Says Froman in Senate Testimony
The Office of the U.S. Trade Representative (USTR) has not yet broached the issue of currency manipulation in Trans-Pacific Partnership negotiations, USTR chief Michael Froman told the Senate Finance Committee in testimony on May 1. Froman also declined to commit to ensure currency rules are included in a final pact. Several Democratic lawmakers said there is poor likelihood TPP implementation legislation will pass Congress without currency provisions.
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“I cannot and will not support a TPP agreement that does not include objective criteria to define and enforce against currency manipulation,” said Sen. Chuck Schumer, D-N.Y. “Currency manipulation hurts our exports to other countries and advantages their exports to us across the board, not just in an industry here or there but every sector of the economy. Any country taking this sort of action that is so detrimental to our economy should not at the same time be granted preferential access to our market.”
The U.S. last named a country a currency manipulator in 1994, when the Clinton administration gave that label to China. Despite claiming China intervenes in currency markets, the Treasury Department declined to name China a currency manipulator in a recent report (see 14041720). China is not a current participant in TPP negotiations, but strong currency provisions would aid U.S. businesses dealing with Japan and South Korea, a prospective admission to TPP negotiations, said a number of Democrats.
“We are doing specific negotiations with Japan and, as you know, Japan has not directly intervened in markets in more than two years but the Yen has depreciated significantly against the U.S. dollar,” said Sen. Debbie Stabenow, D-Mich. “At today’s exchange rates, there’s an estimated benefit of $5,700 on every vehicle. So it’s a windfall in operating profits. It may end up in advertising. It may end up in research and development. It may end up in cutting prices.” Majorities in both the House and Senate have pressed the Obama administration to include currency rules in trade pacts (see 13092423).
The administration remains “very concerned” about currency manipulation, but also sees incentive in a strengthened Japanese economy that will boost demand for U.S. products, said Froman. The U.S. should also continue to press for removal of non-tariff trade barriers in the Japan's auto sector, despite resistance to open its market, Stabenow said (see 14042420). The auto sector represents the largest portion of the growing U.S. trade deficit with Japan, according to Stabenow.
The TPP will likely cause similar deficits if negotiations continue to model the agreement after predecessor pacts, said the advocacy group Public Citizen in a memo to reporters (here) ahead of Froman’s testimony. NAFTA and the FTA with South Korea are dangerous paradigms for TPP, said Public Citizen. “While U.S. average monthly automotive exports to Korea under the FTA have been $12 million higher than the pre-FTA monthly average, average monthly automotive imports from Korea have soared by $263 million under the deal,” said Public Citizen. “In January 2014, monthly automotive imports from Korea topped $2 billion for the first time on record. The post-FTA flood of automotive imports has provoked a 19 percent increase in the average monthly U.S. auto trade deficit with Korea.”
In order to secure the TPP agreement, Congress must first, however, pass Trade Promotion Authority (TPA), argued Froman and several lawmakers from both parties. “If we’re going to succeed in renewing Trade Promotion Authority this year, I think we need to act by June,” said Finance Committee ranking member Orrin Hatch, R-Utah, a co-sponsor of the 2014 TPA bill that has not moved through committee in either chamber. “For that to happen we need to see a greater sense of urgency and much more public engagement from the president and the administration.”
The Bipartisan Congressional Trade Priorities Act, a TPA bill that was introduced in both chambers in January, must be upgraded to ensure negotiation transparency and rules provisions are bolstered, said Finance Committee Chairman Ron Wyden, D-Ore. Committee member Tom Carper, D-Del., expressed support for the TPA bill in a statement submitted for the record. “I believe this bipartisan, bicameral legislation will do a great deal to modernize the process for trade negotiations,” said Carper. “It’s important that this Congress pass this legislation as soon as possible to put the positive economic chain reaction in motion.” Democrats in both chambers, notably the leadership, have largely rejected the bill (see 14021307).
Industry groups and trade proponents continue to staunchly back TPA passage. “To ensure further economic growth and that these 21st century agreements expand market access for U.S. goods and services in key markets around the world, Congress must enact modernized Trade Promotion Authority,” said National Foreign Trade Council President Bill Reinsch in response to Froman’s testimony (here). “We urge Congress to pass TPA legislation as soon as possible this year.” National Association of Manufacturers President Jay Timmons ahead of Froman’s testimony also urged Finance leadership to pass TPA, along with the Generalized System of Preference, the Miscellaneous Tariff Bill and Customs Reauthorization (here). -- Brian Dabbs