February 8, 2015

Obama Administration, Republicans In Congress Ramp Up Efforts To Pass Trade Legislation

While the Economic Policy Institute reported last week that Japanese currency manipulation has resulted in 896,000 fewer U.S. jobs, according to Congressional Quarterly (subscription required), Republican leaders in the U.S. House will start meetings this week to advance President Barack Obama’s trade agenda. Republicans will begin by discussing Trade Promotion Authority (TPA), which U.S. House Ways and Means Committee Chairman Paul Ryan (R-WI) called a priority, but are also likely to address how to handle the Trans-Pacific Partnership (TPP) trade agreement, which the Obama administration is still negotiating. 

As a reminder, U.S. Senate Finance Chairman Orrin Hatch (R-UT) pledged two weeks ago to include efforts to address currency manipulation in his effort to pass TPA while at a hearing last week several members of the Ways and Means Committee told U.S. Treasury Secretary Jack Lew that TPP must include strong currency provisions in order for them to support it. While Secretary Lew said he takes those concerns “very, very seriously,” he did not make any further commitments on the matter and, in testimony before the Senate Finance Committee two days later, actually questioned whether including currency provisions in the TPP would diminish the “effectiveness” of the tools the Obama administration currently uses to address currency manipulation. (Former Obama White House adviser Larry Summers also recently argued for strong currency provisions in trade agreements like TPP.) 

The administration’s failure to address currency issues has already cost it support for its trade agenda. Indeed, faced with opposition among his own party’s leaders, Politico reported last week that President Barack Obama has reached out to freshman Democratic lawmakers to convince them to vote for TPA and the TPP and, in doing so, even brought up competition from China as one reason why they should support these bills. For example, despite the fact that the administration’s own efforts on TPP have not included a discussion of currency manipulation, in a letter to one freshman member, the president invoked China. Politico said the president sent “a letter directly to Rep. Ruben Gallego (D-Ariz.), arguing that reaching new trade agreements is the only way to stop China from dominating the global markets and letting its lax standards run the world.” The letter warned, “If they succeed, our competitors would be free to ignore basic environmental and labor standards, giving them an unfair advantage against American workers.” 

Unfortunately, White House efforts to address this “unfair” Chinese  “advantage” have so far been lacking, which is why MSCI will continue to argue the only way to effectively address the problem is to include strong currency provisions in TPA and TPP.