Over the past decade, currency manipulation by foreign governments has resulted in an increase in unfairly traded imports into the United States and has made it more difficult for U.S. exporters to compete in foreign markets. The practice has cost U.S. workers between one million and five million jobs – and is responsible for as much as half of excess unemployment in the United States. It has also contributed to stagnant wages and to inequality in the United States.
Bipartisan majorities in the House and the Senate have urged the Administration to include strong and enforceable currency obligations in the Trans-Pacific Partnership (TPP), which includes a number of former currency manipulators, such as Japan. Other countries interested in joining TPP in the future – such as China, Korea, and Taiwan – are also current or former currency manipulators.
The IMF already prohibits currency manipulation and has developed guidelines to define when it occurs. The problem is that the IMF lacks an enforcement mechanism. Ranking Member Levin has proposed taking the existing IMF guidelines, building upon them, and establishing an enforcement mechanism through the TPP. Other groups and economists, such as the American Automotive Policy Council (AAPC) and Fred Bergsten of the Peterson Institute, have tabled similar proposals.
A wide range of economists support including currency disciplines in TPP. And the Commission on Inclusive Prosperity recently stated, “New trade agreements should explicitly include enforceable disciplines against currency manipulation that appropriately tie mutual trade preferences to mutual recognition that exchange rates should not be allowed to subsidize one party’s exports at the expense of others.” Former Treasury Secretary Larry Summers recently asserted that the United States should use the leverage provided by TPP to address “inappropriate producer subsidies – including through manipulated exchange rates.”
In addition to addressing currency manipulation in the TPP, Ranking Member Levin is leading efforts to combat currency manipulation by parties not in the TPP. H.R. 820, the bipartisan Currency Reform for Fair Trade Act, was introduced in February 2015 and does just that. The bill would direct the Department of Commerce to apply countervailing duties against foreign goods that benefit from an undervalued currency. The legislation has gained bipartisan support and is identical to the House bill that overwhelmingly passed in 2010 by a vote of 348-79.