Obama's Stance on Currency Manipulation -- in His Own Words
Seven years ago, a rising political star and U.S. senator from Illinois wrote the following to Bush administration Treasury Secretary Henry Paulson. The subject was currency manipulation:
“Your department’s refusal to take action … raises serious questions about the Administration’s commitment to protecting the interests of American businesses and American workers.
“Refusing to acknowledge this problem,” the senator continued, “will not make it go away. … The Administration’s refusal to take strong action against China’s currency manipulation will also make it more difficult to obtain congressional approval for renewed Trade Promotion Authority, as well as additional trade agreements.”
It was legitimate criticism. The Bush administration’s Treasury Department declined every opportunity it had to name offending countries as currency manipulators, a practice used by mercantilist nations to boost their exports at the expense of those of their trading partners.
But as eager as Senator Obama was to do something about this clear form of trade cheating, President Obama has been reticent. Even mustering up a simple acknowledgment of the problem has proven difficult for his administration.
Barack Obama is now halfway through the back nine of a two-term presidency. During the past six years he’s had plenty of chances to correct the problem of international currency manipulation. But he’s done a completely inadequate job. China’s yuan stands at the same level against the dollar as it did back in 2012. That’s not progress. The U.S. trade deficit with China has reached an all-time high under this administration. Japan’s yen has plunged by more than 50 percent against the dollar over the past three years, and American exports to Japan have declined along with it. This data means one thing: We’ve lost a lot of job opportunities in the United States because the administration is not willing to take policy measures to stop currency manipulation.
Now the administration wants congressional support for Trade Promotion Authority (TPA) and the Trans-Pacific Partnership (TPP) trade agreement. So you would think if there was ever a time the administration would get serious about currency, this would be it. Wrong.
The president’s top trade official, Ambassador Michael Froman, went before a Senate Finance Committee panel to sell skeptics in Congress on the benefits of a TPP deal. He was asked point blank by Democratic and Republican senators whether the currency question had been raised in the negotiations.
Mr. Froman demurred, which was as good as saying “no.” He explained the subject was under the purview of the Treasury Department, which has, as was the case with its predecessor, done nothing more than write and talk about currency.
The administration’s dismissal of these concerns is dismaying, as a rule against currency manipulation is a logical fit in trade deals. Mr. Froman himself told the senators that the TPP is a chance for the United States to set the rules of the road for major international trade agreements.
So why don’t we? Currency manipulation is one of the last major forms of protectionism. Many participants in the TPP talks, in fact, have used currency to gain artificial trade advantages in the past. Malaysia, Singapore, and especially Japan spring to mind.
Consider this telling snapshot of the Japanese-American trading relationship: The U.S. exports roughly 20,000 automobiles per year to the Japanese market, while America imports about 1.5 million from Japan. A lot of factors go into the maintenance of Japan’s closed auto market, but an artificially undervalued currency is its bedrock. No amount of conversation with Japanese negotiators will change that dynamic. Only policy incentives built into a trade deal stand a chance.
I don’t think the administration can pass TPA or TPP without adequately addressing currency manipulation within both the trade agreement and the process for approving trade agreements. We have an opportunity to change that, to remove the competition’s fingers from the scales, before this deal is closed. But the Obama administration must stop passing the buck, effectively dismissing the problem of currency manipulation.
Refusing to acknowledge this problem will not make it go away. Remember: Those are President Obama’s own words, not mine.