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April 19, 2015

MSCI Calls For Stronger Currency Provisions In Newly-Introduced Fast-Track Trade Bill

Last Thursday, U.S. Senate Finance Committee Chairman Orrin Hatch (R-UT) and U.S. House Ways and Means Committee Chairman Paul Ryan (R-WI) introduced a long-awaited plan to reauthorize Trade Promotion Authority, or “fast-track,” which allows Congress to pass free trade agreements with other countries through an up-or-down vote. (A summary of the bill can be found here while a section-by-section summary is available here.) 

Trade Promotion Authority expired in 2007 and it is believed Congress must pass TPA reauthorization in order for the Obama Administration to complete negotiations with several Asian nations, including Japan, on the Trans-Pacific Partnership (TPP) trade deal. 

Sen. Hatch and Rep. Ryan’s draft mentions currency issues, but not extensively. The draft says, “The principal negotiating objective of the United States with respect to currency practices 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, such as through cooperative mechanisms, enforceable rules, reporting, monitoring, transparency, or other means, as appropriate.” 

According to Republicans on the House Ways and Means Committee, this TPA plan, if passed, would be the first one to include language related to currency manipulation. However, as Democrats on the House Ways and Means Committee, who released a side-by-side comparison of this proposal to other recent TPA proposals, pointed out, this provision is not substantively different than other recent proposals. 

For this reason and others, House Ways and Means Committee Ranking Member, Rep. Sander Levin (D-MI), who has championed efforts to address currency manipulation in the past, opposes his colleagues’ draft. 

MSCI would also like to see stronger currency provisions. When asked by a trade publication about the organization’s stance on TPA, MSCI Vice President of Finance and Government Affairs Jonathan Kalkwarf said, “We are encouraged that TPA, for the first time, considers the real issue of currency manipulation by our trading partners, but we must go farther. As such, we are in full support of efforts … to include enforceable currency provisions in any new trade agreement. Without such an amendment, the currency title has no teeth.” 

According to Politico, Sen. Rob Portman (R-OH) and Sen. Debbie Stabenow (D-MI) plan to offer an amendment during a Senate Finance Committee TPA hearing next week that would require the U.S. to put enforceable currency provisions in the Trans-Pacific Partnership trade deal that is tied to TPA renewal. Politico says the provision “would set a standard in the TPA bill to ‘ensure that currency is not just considered [in trade agreements], but that it’s enforced, that it has teeth’” and would “be based on International Monetary Fund standards for assessing whether currencies are undervalued.” MSCI plans to support the Portman-Stabenow effort specifically. 

Members of the Finance and Ways and Means committees will begin markup of the TPA bill next week and Senate leaders hope that chamber will vote on a bill by the end of April. 

The draft bill is available for download here.