[CTC] Treasury working the phones on TPP currency side agreement

[Arthur Stamoulis]

politico
Treasury working the phones on TPP currency side agreement

By Doug Palmer 

7/29/15 9:49 PM EDT
KAANAPALI, Hawaii — As trade negotiators haggle this week over dairy tariffs and drug patent protections in the Trans-Pacific Partnership, another set of negotiations is taking place largely by phone between the capitals on a hot-button issue that countries are loathe to include in trade pacts: currency manipulation.

“We are discussing with all of our TPP partners provisions to promote our mutual interest in preventing unfair currency practices,” a Treasury Department spokesman confirmed Wednesday after Australian Trade Minister Andrew Robb broke news of the currency talks. The proposal, which is being pushed by the U.S., would create a forum to discourage TPP members from manipulating their currencies in order to gain an unfair trade advantage.

“Since day one, the president and this administration have been clear that no country should grow its exports based on a persistently undervalued exchange rate, and currency has been at the top of Treasury’s international agenda,” the Treasury spokesman added in an email from Washington, speaking on condition he not be named.

Negotiators are considering the proposal as a side agreement outside the TPP pact rather than fashioning it into a chapter on currency. While there appears to be a general acceptance of the idea, some countries are said to have concerns about whether any commitments they make would require them to change their national laws.

Another round of phones calls between Treasury officials and the countries is expected in the coming days to discuss initial feedback on the U.S. proposal. Treasury staff will also be traveling to the TPP capitals for further talks in the hope of quickly achieving something concrete.

Detroit-based automakers — particularly Ford — made a big push for Congress to require the White House to seek enforceable rules against currency manipulation in the trade pact.

They argued the Japanese government has a history of driving down the value of the yen to unfairly help its automakers compete in world markets, and the administration should demand binding rules in the trans-Pacific trade deal that would prevent that from happening.

The White House successfully rebuffed the call for enforceable currency rules, arguing they could backfire on the United States by creating a mechanism for other countries in the trade deal to challenge Federal Reserve monetary actions.

Other TPP members, including Japan, shared that concern and told the Obama administration they were opposed to including enforceable provisions.

However, the issue was too big for Congress to remain silent. So the recently approved trade promotion authority bill for the first time made addressing currency manipulation a principal negotiating objective of the administration.

As a result, the White House must come up with a scheme to deal with the issue or risk Congress revoking “fast-track” protections for the trade pact, a situation that would open the deal up to amendments when it goes to Congress for approval, potentially unraveling the agreement.

That reality has helped the Treasury Department persuade the TPP countries of the need for the side agreement. However, at least one member of Congress who pushed for strong currency rules, Sen. Rob Portman of Ohio, is taking a wait-and-see approach.

“We are reviewing the proposal,” Portman spokeswoman Caitlin Conant said in an email. But given the negotiating objectives on currency, “we believe that this forum must have teeth to ensure American workers are on a level playing field with global competitors.”

The American Automotive Policy Council, which represents Ford, General Motors and Fiat Chrysler, also expressed skepticism, albeit based on the scanty information available about the initiative.

“Without knowing any details, it is difficult to see how this additional forum would be a meaningful way to address currency manipulation,” group President Matt Blunt said in an email from his office in Washington.

The U.S. Chamber of Commerce opposes the idea of including currency provisions in a trade agreement, so it supports the Treasury Department’s effort to pursue the issue outside of the TPP. But it’s an important issue “that’s shown it has political legs,” Tami Overby, the group’s senior vice president for Asia, said at the meetings in Maui.

“We’ve got to find a way to deal with it,” Overby added, calling the idea of creating TPP currency forum “an interesting option.” But the U.S. Chamber still needs to examine the issue more thoroughly before taking a formal position, she said.


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