The Obama administration’s push to complete two major free-trade deals got more difficult Tuesday when a key House Democrat said the agreements should be tied to a broader discussion of U.S. economic competitiveness.
Rep. Sander M. Levin (Mich.), an auto-state lawmaker and the ranking Democrat on the committee that oversees trade policy, said the United States had “failed” in prior talks to open important markets such as Japan’s automobile sector and should use ongoing negotiations with Pacific Rim nations and the European Union to put in place tough new regulations on currency, trade finance and other policies.
Absent that, he said in a Tuesday speech at the Peterson Institute for International Economics, it would be difficult to convince Congress that any free-trade deal would be good for the U.S. economy. The discussion should also include increasing loans for exporters and other strategies to counter the methods used by China to boost its overseas sales.
“I want the administration to face up” and address long-standing congressional complaints that the United States has been lax in countering other countries’ use of exchange-rate and related policies to gain a trade advantage, Levin said. While the administration has set a tight timetable to conclude the two agreements, “the train has to be slow enough to handle all the major issues, and if it isn’t, there will just be immense conflict” in Congress.
His comments set up a fight on Capitol Hill that will have to be waged before either trade deal is completed.
It is assumed that for either pact to be enacted, Congress will first have to renew “fast track” trade promotion authority. Fast track limits Congress to a quick up-or-down vote on any free-trade treaty. Officials and analysts agree that U.S. trade partners are unlikely to sign any treaty unless TPA is in place, guaranteeing quick consideration by Congress and no opportunity for amendments that would send everyone back to the bargaining table.
But its renewal is likely to prove controversial in a Congress that has found it difficult to reach consensus on even non-contentious matters.
Members will not only delve into the details of any likely agreement, but — as Levin’s comments indicate — use the debate to force larger questions.
Both the House and the Senate, for example, have at different points approved legislation penalizing countries that use “currency manipulation” to gain a trade advantage — bills largely aimed at China.
Levin said that concept should be built into a new TPA law and used in the Trans-Pacific Partnership negotiations as a way to explicitly target Japan’s auto market — the third largest in the world but notoriously difficult for imports — and allegations that it has used currency tools in the past to boost its exports.
Japan officially joined the 12-nation talks this week, greatly expanding the reach and potential economic import of the agreement.
The Obama administration did not respond directly to Levin’s critique, but it noted that negotiators in April secured some advance steps by Japan to import more U.S. automobiles. Japan has the second-largest trade surplus with the United States, next to China, much of it related to auto sales.
In the past, the administration has opposed efforts to tie trade penalties to a nation’s currency policy, arguing that the matter is better resolved diplomatically and that it is difficult to separate steps designed to rig a country’s exchange rate from those meant to regulate the money supply, control interest rates or pursue other legitimate monetary policy goals.
The United States itself has been accused of “competitive devaluation” in recent years because of the Federal Reserve’s policy of quantitative easing. Similar steps by the Bank of Japan have driven down the value of the yen against the dollar, but U.S. officials, the International Monetary Fund and others have argued that those measures were largely needed to revive the nation’s stalled economy.
Levin, however, noted the long and mostly unsuccessful history of trying to open Japan’s auto market to U.S. imports, saying that the opportunity provided by the trade talks should not be squandered. When countries run heavy trade surpluses and accumulate large amounts of foreign currency to be held in reserve — as Japan has done over the years — that indicates that something beyond standard monetary policy may be at work, Levin said. He urged that specific benchmarks be included in any trade pact to determine whether a country’s currency policy is out of line.