[CTC] Currency side deal on TPP unlikely to satisfy Congress

[Arthur Stamoulis]

 POLITICO Pro
 
Currency side deal on TPP unlikely to satisfy Congress
By ADAM BEHSUDI <https://www.politicopro.com/staff/adam-behsudi> 
10/05/15 10:36 AM EDT
U.S. officials are nearing conclusion on a side agreement to the Trans-Pacific Partnership that seeks to allay congressional fears over currency manipulation in the Asia-Pacific region, a source familiar with the discussions said.

But new details of the agreement reveal it may fall well short of the tough approach many U.S. lawmakers have demanded to prevent countries from devaluing their currencies to boost exports.

The agreement in principle on the 12-nation trade pact, reached Monday in Atlanta, tackles a number of hotly debated negotiating issues, such as the length of time pharmaceutical companies can maintain monopoly protections on biologic drugs and complex content, as well as tariff rules for cars.

But the deal's highly anticipated currency language — negotiated separately among finance ministers and central banks over the past three months — would not do what lawmakers have repeatedly requested: directly punish currency manipulators by withdrawing their benefits under the trade deal.

The issue has united Rust Belt Republicans like Sens. Rob Portman and Democrats like Sherrod Brown, both of Ohio. Conservative Republican Sen. Lindsey Graham of South Carolina also sees eye-to-eye on the issue with liberal Democrats like Rep. Rosa DeLauro of Connecticut.

The administration, however, has been reluctant to punish certain monetary policies with sanctions lest it be punished by its own rules. Senate Finance Committee Chairman Orrin Hatch and House Ways and Means Chairman Paul Ryan also warned of the potential for a “currency war,” although they acknowledge manipulation is a problem.

“Our ultimate aim is to establish a clear and enforceable currency manipulation discipline,” a bipartisan group of 160 House members wrote in the latest appeal <https://debbiedingell.house.gov/media-center/press-releases/advance-weekend-tpp-negotiations-bipartisan-group-158-representatives>from lawmakers on the issue. “The TPP is the best opportunity to achieve such a discipline.”

At the outset of discussions, TPP countries made clear they did not want their monetary decisions to be subject to dispute settlement under the trade deal, but would rather try to solve problems through the existing structure of the International Monetary Fund or other international organizations, the source said.

Also to be determined is whether the final TPP deal will make specific reference to the separate currency agreement, the source said.

The TPP side deal would meet the requirements of the currency negotiating objective Congress laid out in trade promotion authority legislation, in which lawmakers make broad demands in exchange for agreeing to fast-track passage of a final trade deal, the source said.

The fast-track bill requires that currency manipulation be addressed but gives the administration flexibility to tackle the issue with a range of options, such as “cooperative mechanisms, enforceable rules, reporting, monitoring, transparency, or other means, as appropriate.”

The currency deal, which could be agreed to in conjunction with TPP, would ultimately require governments to seek common ground on exchange rate policies, although it's unclear yet what commitments countries will specifically make. The agreement would also require countries to meet on what is likely to be a yearly basis and develop a transparent system for reporting monetary policy decisions.

A currency commitment among TPP countries could include elements of a pledge G-20 countries took in 2013 not to devalue currency to gain a trade advantage, but would also attempt to address broader macroeconomic policies deemed unfair, the source said.

U.S. automakers have been the most vocal about the need for currency rules in the TPP, arguing that past devaluations by Japan have left them at a severe trade disadvantage. U.S. lawmakers are also warily eyeing China, which is not a TPP country, after Beijing devalued the yuan in recent weeks partially as a response to an economic slowdown.

Ford came out early against the deal, urging Congress to not approve the agreement because it fails to address currency manipulation.

"This summer, U.S. lawmakers took unprecedented action to set a clear negotiating objective for addressing currency manipulation in all future trade deals," the company said in a statement. "The TPP fails to meet that test."

 
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