[CTC] TPP Countries To Adopt Nonbinding Commitments Via Currency Side Deal

[Arthur Stamoulis]

TPP Countries To Adopt Nonbinding Commitments Via Currency Side Deal
Inside US Trade
Posted: October 08, 2015

The United States and 11 other TPP countries are still negotiating a side agreement to the Trans-Pacific Partnership (TPP) that will incorporate nonbinding commitments on exchange rate policies in an effort to discourage currency manipulation, as well as broader macroeconomic commitments, according to a source familiar with the discussions.

The discussions on currency manipulation center around three key commitments countries would undertake as part of this side deal. First, the TPP countries would commit to not devalue their currencies so as to make their exports cheaper. Second, they would bolster the transparency of their respective monetary policies and decision-making. Finally, the countries would set up a multilateral forum to discuss exchange rate policies and broader macroeconomic issues.

It is not clear how often officials would meet in this configuration, or at what level.

The source indicated that TPP countries are very close to coming to an agreement on these points and are entering a technical review of the side deal. This latter point was referenced in a separate joint statement from the TPP countries that was released by the U.S. Treasury Department.

"We are pleased to announce today that we are working to strengthen macroeconomic cooperation, including on exchange rate issues, in appropriate fora," the countries said in the joint statement. "The work to be undertaken reflects our common interest in strengthening cooperation on macroeconomic policies, and will help to further macroeconomic stability in the TPP region as well as help ensure that the benefits of TPP are realized."

"Keeping in mind the diverse circumstances of the TPP countries, we are currently undertaking a technical review," the countries added in the statement. A person familiar with the discussions noted that exchange rate policies are very technical in nature, and require TPP countries to review the commitments being discussed carefully.

The source was not specific about the timing of the technical review, saying only that it would be complete within the coming days or weeks. But the release of the agreement will likely coincide with the release of the full TPP text, according to informed sources.

In addition, the TPP countries are also working on a set of broader macroeconomic commitments, the source said. These are commitments to take the forum beyond discussing exchange rate policies and include economic growth issues as well, the source said.

Australian Trade Minister Andrew Robb, at the closing press conference of TPP talks in Atlanta, broadly referenced these points. He said countries are working to establish a forum and a set of "principles" for their discussions on currency manipulation, and that these principles are "going to be agreed and are more or less agreed."

"It will establish, I think they have agreed to establish, a forum," Robb said during the conference, referring to TPP ministers in charge of monetary and economic policy, who are leading these talks. "Now they are just looking at the principles and the issues that will be regularly considered by a representative group from each country."

The public statement comes after sources in July, when the previous round of TPP talks was held, said the U.S. had proposed a side agreement that would set up a committee where officials from the 12 nations could discuss allegations of currency manipulation, but without recourse to binding dispute settlement (Inside U.S. Trade, July 31).

This negotiation has been taking place in parallel to the TPP talks, but on a separate track.

Japanese economic and fiscal policy minister Akira Amari, also speaking at the closing press conference, underscored that currency manipulation is a global problem not confined to the TPP region, but that TPP countries should try to share views and recommendations about the issue in order to better address it.

The lack of enforceable currency rules in TPP has been a sore spot for both congressional Republicans and Democrats. House Ways & Means Committee Ranking Member Sander Levin (D-MI), in a statement reacting to the TPP deal called the finance ministers' plan regarding currency manipulation "entirely unsatisfactory."

Ford Motor Company, which supported the U.S.-Korea free trade agreement, also said in a statement that the TPP failed to satisfy the negotiating objective on currency in the Trade Promotion Authority (TPA) law and that Congress should reject the deal to force the administration to renegotiate (see related story).

The source close to the discussions, however, argued that the Obama administration has taken into account the feedback and proposals offered up by Levin and the other leaders of the congressional trade committees.

The TPA law contains two principal negotiating objectives with regard to currency. The first is that "parties to a trade agreement with the United States avoid manipulating exchange rates in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other parties to the agreement."

It says this could be achieved "through cooperative mechanisms, enforceable rules, reporting, monitoring, transparency, or other means, as appropriate." The second objective is for the U.S. to "seek to establish accountability through enforceable rules, transparency, reporting, monitoring, cooperative mechanisms, or other means to address" exchange rate manipulation.

None of the lengthy fact sheets the Obama administration released on the TPP deal on Oct. 5 discussed the issue of currency manipulation, further illustrating how the administration has kept the issue on a parallel track.
 
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.citizenstrade.org/pipermail/ctcfield-citizenstrade.org/attachments/20151009/23086d7f/attachment-0001.htm>