(What’s Left of) Our Economy: Treasury’s Lew Exposes Fast Track as a Sham

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Congress, currency manipulation, fast track, Jack Lew, monetary policy, Obama, Senate Finance Committee, TPA, TPP, Trade, Trade Promotion Authority, Trans-Pacific Partnership, Treasury Department, {What's Left of) Our Economy

For someone supposed to be a political whiz due to staff experience on Capitol Hill, Treasury Secretary Jack Lew sure has been acting like a political bungler in explaining to Congress why strong currency manipulation sanctions don’t belong in trade deals like President Obama’s proposed Trans-Pacific Partnership (TPP).

In his April 21 letter to the Senate Finance Committee, Lew both fatally undermined both the president’s insistence that the fast track bill gives Congress meaningful influence on U.S. trade negotiations, and Washington’s (feeble) efforts to end protectionist exchange rate policies abroad.

Lew’s letter, after all, emphasized two arguments. He claimed, “all of the partners consulted have made clear that they will not support the introduction of enforceable currency provisions in the context of trade agreements, and specifically, the TPP.” And he pointed to the administration’s “serious concern that in any trade negotiation other countries would insist that an enforceable currency provision be designed so it could be used to challenge legitimate U.S. monetary policy, an outcome we would find unacceptable.“

Lew’s first point amounts to an admission that Congress can put all the negotiating instructions it wants to in a fast track bill, but that the administration will ignore them if the other TPP countries (or any other countries talking trade with Washington) say they oppose them. Of course, this position not only tells lawmakers they’re kidding themselves. It also tells America’s interlocutors that they have the whip hand in trade talks.

Lew’s second point needlessly hands foreign governments an all-purpose excuse to stonewall Washington’s efforts to eliminate “unfair and inappropriate currency polices [that] have hurt our workers and firms,” as he has labeled them. For now his counterparts need only claim that these measures are no different from America’s own monetary easing.

Especially weird about this Lew argument is that, assuming it’s serious, his own efforts to end these foreign exchange rate policies logically have to be based on a belief that they are clearly different from the Federal Reserve’s moves. Rather than strengthen foreign governments’ positions, why doesn’t he tell Congress, the American people, and U.S. trade rivals what these distinctions are, and urge American lawmakers to add to his bargaining power by linking countermeasures to the trade talks?

One likely answer: Despite official protestations to the contrary, President Obama is ready to accept a bad TPP trade deal over no deal at all. Consequently, Congress has been put squarely on the spot. A senior U.S. official has now openly admitted that its instructions are pointless, and that Mr. Obama’s position on lawmakers’ currency concerns is a matter of choice, not necessity. What better reasons to end the sham of TPP and fast tracking its approval once and for all?

(What’s Left of) Our Economy: Hatch Joins Obama in Looking Like a Currency-Related TPP Phony

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Barack Obama, currency manipulation, fast track, House Ways and Means Committee, Michael Froman, Orrin Hatch, Paul Ryan, Senate Finance Committee, TPA, TPP, Trade, Trade Promotion Authority, Trans-Pacific Partnership, U.S. Trade Representative, {What's Left of) Our Economy

The politics of currency manipulation, which are strongly influencing Congress’ views of President Obama’s prospective Trans-Pacific Partnership (TPP) trade deal, just keeps getting more and more interesting.  So do policy moves surrounding the issue. The bottom line:  Both new Senate Finance Committee chair Orrin Hatch and the Obama administration seem to be stepping up efforts to snooker Congress and the public on measures to safeguard American businesses and their employees against this exchange-rate protectionism.

Hatch is drafting new Trade Promotion Authority (TPA) legislation along with his House Ways and Means counterpart Paul Ryan of Wisconsin, and both will have major says over whether the Pacific trade deal and the negotiating authority critical to its approval will pass Congress. And he’s definitely trying to pose as a public servant completely alert to currency threats.

Just look at the widely reported speech the Utah Republican gave on trade at the end of last month. He blasted President Obama for “pretending these [currency] concerns don’t exist” and proudly declared that “we included within our TPA bill, for the first time, a new principal negotiating objective addressing currency manipulation.”

But upon closer inspection, it’s clear that Hatch’s definition of “meaningful” is a low bar. So far he has simply stated, “We need to see commitments from our partners in ongoing trade negotiations to avoid manipulating exchange rates to gain an unfair competitive advantage over other parties to the agreement, a standard reflecting commitments parties have made in the International Monetary Fund.” In other words, Hatch appears to be pushing language in this fast track legislation that merely urges the president’s trade negotiators to try their best to deal with the issue. Worse, it sounds like he would be satisfied with promises from other TPP signatories that they already have often broken whenever they have believed their interests dictate.

In fact, Hatch made no reference in his address to inserting enforceable disciplines against currency manipulation in the TPP. Given the likelihood that the agreement will include a dispute-resolution process giving a major role to countries with a demonstrable fondness for manipulation, such rules are shaky bets at best to safeguard American businesses and their employees against exchange-rate protectionism. But it’s revealing that Hatch seems unwilling even to support this inadequate measure.

At the same time, Hatch’s apparent double-talk on currency manipulation shouldn’t be a surprise. Back in 2005, when the Senate was considering a bill to enable Washington better respond to currency manipulation unilaterally by using U.S. Trade law mechanisms, Hatch supported the legislation – on a vote that was wholly procedural. The bill’s own sponsors eventually withdrew it following (eventually broken) administration promises to increase pressure on China. In 2011, when the Senate took up a similar bill in final form, Hatch flip-flopped and voted “Nay.”

Not that Hatch is looking like Washington’s only currency manipulation phony. President Obama reportedly has told House Democrats that adding the issue to the TPP would be “complicated.” Yet he has also staunchly opposed dealing with foreign currency protectionists unilaterally – in the form of the aforementioned 2011 bill. Moreover, although U.S. Trade Representative Michael Froman has been testifying under oath to Congress that currency issues are the Treasury Department’s province and that Secretary Jack Lew is raising these matters in international fora like the Group of 7 major economies and the International Monetary Fund, journalists keep reporting the opposite.

In October, according to a New York Times piece, Lew and the rest of the administration, along with the Federal Reserve, had decided to accept the lower currency values that inevitably followed foreign central bank monetary easing moves because they were needed to stoke growth overseas. Just yesterday, the Financial Times reported that this enabling of foreign currency manipulation has continued.

The Hatch, Obama, and Froman hokum at least clarify one point. Supporters of U.S. trade policy still don’t think they can steer new agreements through Congress by telling the truth.