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I would hate to think that New York Democratic Senator Chuck Schumer has been conning the nation yet again on the currency manipulation issue, but the new trade compromise announced by Republican leader Mitch McConnell of Kentucky and his Democratic counterpart Harry Reid of Nevada has me scratching my head. In fact, I know that the analysis in this post may be a little difficult follow. But a bit of extra effort to understand this byzantine legislative tale will be well worth your while.    

The deal figures to break the Senate deadlock over President Obama’s request for fast track trade negotiating authority, which was created by yesterday’s defeat of a motion to begin floor debate officially. A major sticking point was McConnell’s refusal to combine the fast track request with a vote on several other trade bills. And one of these included a Schumer measure that would crack down meaningfully on foreign governments that undervalued their currencies in order to undersell competing U.S.-origin goods and services for reasons totally unrelated to free market forces.

The idea reportedly was that Congress’ Republican leaders would summarily reject the connected package as a trap that would doom any chances for new trade deals. For they and other fast track backers have continually claimed that foreign governments are dead set on preserving full freedom to engage in such exchange rate manipulation, and would react by simply refusing to negotiate seriously with Washington.

For reasons that frankly escape me, the Republicans took the bait. As a result, many Senate Democrats who ordinarily vote for such job-killing trade agreements mounted their high horses, joined forces with the trade policy critics in their party, and mustered enough votes to stall the fast track bill. These reasons escape me because a freestanding bill with even the best currency manipulation provisions has almost no chance of becoming law and therefore influencing U.S. trade policy.

After all, Republican Speaker John Boehner of Ohio has fought hard and successfully to keep a strong House currency bill off the floor, and so far his rank and file has been unwilling to openly challenge him and overturn his decision. Even if the legislation passed both House and Senate, unless the majorities were veto-proof (which looks far-fetched), the president could easily turn it aside. And if new trade deals don’t genuinely outlaw currency manipulation, other signatory countries could deter any unilateral American anti-manipulation actions with the threat of their own retaliatory sanctions.

The real way to ensure that American trade policy responds effectively to currency manipulation is by including in the president’s fast track negotiating instructions a flat requirement that he ensure the inclusion in new trade deals – like Mr. Obama’s proposed Trans-Pacific Partnership (TPP) – of enforceable disciplines against this currency protectionism. The manipulators could still frustrate U.S. aims by dismissing even the best documented American complaints. But the link to fast track would matter most by serving as a poison pill, since supporters of the expedited trade procedures insist that strong currency measures would be a fast track deal killer, and their inclusion would likely sink fast track for the time being.

Schumer has loudly championed the idea of cracking down on currency manipulators for many years. But his agreement to separate currency issues from the fast track vote dovetails with a disturbing pattern of failing to follow through with actions at crucial junctures. In particular, in early 2005, he and South Carolina Republican Lindsey Graham introduced a promising anti-currency manipulation bill in the Senate, and spoke passionately about the need to match Washington’s years of words on the issue with deeds. Yet that June, both lawmakers consented to postponed a vote in exchange for a series of flimsy Bush administration promises, and were content later that year to drop their initiative altogether following another series of comparably weak commitments.

In principle, Schumer could argue that a separate currency bill would still be useful to counter Chinese manipulation, since Beijing is not (yet) part of the Pacific Rim trade deal. But again, standalone bills have repeatedly failed on Capitol Hill, and there is no reason to suppose that their chances are any better today.

The fast track bill still faces major, and possibly insuperable, hurdles in the House. And as I wrote yesterday, the previous Senate vote still marks a Congressional milestone – however cynical the motives of many lawmakers might have been. Nonetheless, the maneuvering by Schumer (and, to be sure, like-minded Democratic colleagues) made what’s often called “The World’s Greatest Deliberative Body” a good deal less great. And given the strong odds of Schumer succeeding Reid as Democratic leader, a meaningfully brighter future is looking awfully hard to predict.