[CTC] Sources: Binding currency provisions included in U.S.-Mexico deal

[Arthur Stamoulis]

INSIDE US TRADE

Sources: Binding currency provisions included in U.S.-Mexico deal
September 24, 2018 at 12:45 PM
The new U.S.-Mexico trade deal includes currency provisions that will be subject to dispute settlement rules, Inside U.S. Trade has learned, marking a departure other U.S. trade agreements that address currency in non-binding side pacts.
The inclusion of currency provisions subject to dispute settlement mechanisms has been a key goal of several lawmakers and U.S. industry groups as the U.S. has renegotiated the North American Free Trade Agreement. To date the U.S. has struck a deal with Mexico alone; Canada and the U.S. continue to negotiate.
Additionally, a private-sector source contended that if the provisions were binding, progressive groups might see them as “another reason” to support a new NAFTA or “at least stay neutral” because the inclusion of enforceable provisions aimed at deterring currency manipulation has also been a key priority <https://insidetrade.com/node/162283> for them.
While the currency provisions in the Mexico deal are binding, one source questioned whether the language could be enforceable. The source called the inclusion of currency language in the deal itself -- as opposed to a side agreement -- a step forward but questioned whether the provisions would effectively address manipulation concerns that have been raised to the administration.
Several lawmakers, including Sen. Ron Wyden (D-OR) have characterized currency manipulation deterrents as key improvements that should be included in NAFTA 2.0. Wyden, who serves as ranking member of the Senate Finance Committee, spoke with U.S. Trade Representative Robert Lighthizer last May about the inclusion of language that would address currency manipulation <https://insidetrade.com/node/158776>. “Certainly that's what the members have been concerned about,” Wyden said.
Lighthizer told lawmakers last year that he was seeking “a model statute on currency” but would not elaborate on what such a provision might entail. USTR's NAFTA negotiating objectives <https://insidetrade.com/node/161074> say the Trump administration is seeking “through an appropriate mechanism” to ensure that NAFTA countries “avoid manipulating exchange rates in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage.”
Fact sheets outlining the U.S.-Mexico deal released last month, however, do not include language on currency.
Last month, Treasury Secretary Steven Mnuchin said a currency chapter <https://insidetrade.com/node/164197> would be a “part of the NAFTA deal,” but did not say whether it would be subject to dispute settlement provisions.
“As part of the NAFTA deal, for the first time, we have a very strong currency chapter that talks about currency transparency,” he said on Aug. 28. “So this is something we’re very much focused on in all of our trading relationships."
In March, the U.S. and South Korea, in talks about modifying their free trade agreement, agreed to a currency side deal that, according to senior administration officials, would not be subject to dispute settlement rules <https://insidetrade.com/node/162466>. The side deal, which was delegated to the Treasury Department and South Korean Ministry of Strategy and Finance, would be used to inform currency provisions in NAFTA, the officials added.
The status of the side deal, however, remains unknown as it was not published with the text of other “negotiated outcomes” <https://insidetrade.com/node/164282> released by USTR earlier this month.
“Building on existing discussions, the U.S. Treasury and Korea’s Ministry of Strategy and Finance intend to meet frequently to discuss concerns arising from macroeconomic and foreign exchange policies,” a Treasury Department spokesman told Inside U.S Trade on Sept. 5. “Both countries continue to maintain a market-oriented exchange rate and are avoiding currency manipulation.”
One source expressed surprise that the currency side deal wasn't released along with the other KORUS outcomes, as a side deal was released at the same time as the text of the Trans-Pacific Partnership.
The Obama administration negotiated and agreed to a joint declaration <https://insidetrade.com/node/150945> signed by all 12 TPP members in which they committed <https://www.treasury.gov/initiatives/Documents/TPP_Currency_November%202015.pdf>not to manipulate their currencies and to follow transparency requirements. President Trump withdrew the U.S. from the agreement shortly after taking office.
Several international trade lawyers said they expected the U.S.-Mexico currency language to be similar to TPP's. -- Isabelle Hoagland (ihoagland at iwpnews.com <mailto:ihoagland at iwpnews.com>)




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