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By Len Bracken
Aug. 11 — Several U.S. lawmakers cited the need for currency provisions in the prospective Trans-Pacific Partnership (TPP) agreement in light of China's Aug. 11 devaluation of the yuan by 1.9 percent against the dollar.
Sen. Sherrod Brown (D-Ohio), a member of the Finance Committee, and Rep. Sander Levin (D-Mich.), ranking member on the Ways and Means Committee, said in separate statements that the prospect of China eventually joining the TPP highlights the need for provisions prohibiting currency manipulation in the pact that U.S. officials hope to conclude this year. Sen. Charles Grassley (R-Iowa), a senior member of the Finance Committee, said according to the administration, currency is an “outstanding issue” in the talks among the U.S. and 11 other Pacific Rim countries.
A Treasury Department spokesman said in an Aug. 11 statement that it is “too early to judge the full implications” of China's devaluation, which was prompted by a report of decreased exports. “Any reversal in reforms would be a troubling development,” the spokesman said.
Finance ministers from the TPP countries are negotiating a side agreement on currency that would set up a committee to meet annually to review exchange rate practices, government and industry sources have told Bloomberg BNA. The side agreement on currency is being negotiated separately from the trade and investment talks, with finance ministers speaking by phone or meeting bilaterally, the sources said.
“We are discussing with all of our TPP partners provisions to promote our mutual interest in preventing unfair currency practices,” a Treasury Department spokesman said in a July 29 statement sent to Bloomberg BNA. “The currency provisions we are developing in the context of TPP would promote greater accountability of currency policies and would be aimed at meeting the principal negotiating objective on currency that Congress included, for the first time, in the Trade Priorities and Accountability Act passed in June.”
The legislation, commonly known as trade promotion authority (TPA), sets out negotiating objectives the administration must meet in order for the trade agreements it negotiates to be voted on by Congress on an up-or-down basis without amendments. Whereas TPA calls for inclusion of currency provisions in U.S. trade agreements, Japan opposed this, a TPP government source said, who added that talks on the side agreement are quite advanced.
Alan Wolff, chairman of the board at the Nation Foreign Trade Council and a former deputy special representative for trade negotiations with the Treasury Department, noted Aug. 7 in a briefing with reporters that the currency provisions will not be enforceable through the TPP dispute settlement mechanism but they might nonetheless hold some promise by making countries that have to consult less willing to intervene in ways that they have in the past.
Tami Overby, senior vice president for Asia at the U.S. Chamber of Commerce, said at the same Aug. 7 briefing that the countries she has spoken to about the side agreement have seemed very open to the side agreement aiming to allow finance ministries, exchange rate, and monetary authorities to address currency issues in order to promote greater accountability and to avoid exchange rate manipulation.
“Many of them feel affected by currency as well,” she said, adding that this appears to be a very serious attempt to deal with what is a “very real” issue of concern on Capitol Hill and with U.S. manufacturers, notably automakers. Mechanisms in previous agreements that require annual meetings have proven effective, she said.
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The comments from the People's Bank of China are available at http://tinyurl.com/q995ce6.
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