As debate over the Trans-Pacific Partnership (TPP) deal rages on, a growing number of lawmakers and economic experts are troubled by the massive trade agreement's lack of strong rules against currency manipulation by foreign member countries. Calls for currency manipulation prohibitions in the TPP also come amid heated deliberation over legislation that would give President Barack Obama "fast-track" trade authority.
Currency manipulation involves a country artificially suppressing the value of its currency, usually relative to the U.S. dollar, to reduce the price of its exports, essentially giving itself a leg up over competitors. This practice is a key cause of the continuing U.S. trade deficit and has displaced between 1 million and 5 million American jobs.
It's estimated that between $200 billion and $500 billion of the U.S. trade deficit is due to currency manipulation by foreign countries, according to research from the Washington, D.C.-based Peterson Institute for International Economics.
If currency manipulation was eliminated, the U.S. could see between 2.3 million to 5.8 million jobs created, many of them in manufacturing, a recent report from the Economic Policy Institute estimates. By eliminating currency manipulation, Illinois alone could gain between 107,500 to 266,400 jobs.
As part of the TPP trade agreement, the United States is in negotiations with several countries, including Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
Of those countries, Japan, Malaysia, and Singapore have engaged in currency manipulation, according to EPI. Looking specifically at Japan, EPI estimates that the U.S.-Japan deficit, driven by currency manipulation, cost nearly 900,000 American jobs just in 2013 alone.
"Inclusion of a currency manipulation clause in the TPP would be an important first step in creating a regime of enforceable currency manipulation disciplines," said Robert Scott, EPI's director of trade and manufacturing policy research. "However, the long-run goal must be to end currency manipulation by all countries, not just those who join the TPP. The U.S. needs other tools to end currency manipulation, and new enforcement tools are the key."
Meanwhile, the Trade Promotion Authority measure, a bill that would grant Obama "fast-track" trade authority, could be considered in the Senate as early as Tuesday. Fast tracking would limit debate on the final TPP agreement and prevent Congress from making changes to it. The president, who is at odds with many in his party over the TPP and TPA, insists he needs such authority to close the Pacific trade deal.
As for including provisions against currency manipulation in the TPP, Obama has rejected the idea, though he remains open to tackling the issue through some other avenue.
"We're still working with members of Congress who are interested in the currency issue to potentially do something parallel to TPP," Obama said late last month, the Washington Post reported. "But [it's] not a good idea, and not plausible, for us to get an effective currency provision inside of TPP" that would be acceptable to the involved countries plus the U.S. Treasury Department and Federal Reserve.
Senate Majority Leader Mitch McConnell, who is siding with Obama on the TPA legislation, is looking to bring the fast-track bill up for a procedural vote Tuesday.
In addition to McConnell, U.S. Sen. Mark Kirk (R-IL) is joining other Republicans in support of the TPA.
"As an export state, with 1.7 million jobs in Illinois supported by trade, I agree with the President that access to new markets in a fair trade system will keep high-paying jobs here and not lost to countries like China," Kirk in a statement, according to Crain's.
The TPA, Kirk added, "will facilitate the Obama Administration's negotiation of the Trans-Pacific Partnership trade deal while maintaining Congress' authority via legislation to approve or disapprove of negotiated trade deals."
But U.S. Sen. Dick Durbin told reporters on Monday that he questions whether McConnell has enough support to advance the TPA to the Senate floor for consideration. Senate Democrats want to attach the TPA to other trade-related bills, including one addressing currency manipulation.
If the TPA measure passes the Senate, it would still need approval from the House.
U.S. Rep. Tammy Duckworth (D-IL,8), who is challenging Kirk for his Senate seat in 2016, is one of a number of lawmakers, mostly Democrats, raising concerns over currency manipulation and other issues as it relates to the White House-backed TPA bill.
"The TPA fails to set adequate, meaningful negotiating standards on currency manipulation, rules of origin and labor and environmental standards," the congresswoman said in a recent statement. "This particularly worries me, since the administration is in the final stages of negotiating the Trans-Pacific Partnership, a trade deal that includes countries with troubling track records in these areas. The TPA under the Hatch-Wyden-Ryan deal fails to ensure these standards are met and leaves Congress with a weakened voice on crucial decisions facing American workers."
UPDATE 1 (3:27 p.m.): The Senate put a damper on the push to move the TPP forward by a 52-45 vote Tuesday afternoon. The procedural vote to move the initiative forward required 60 votes. Had lawmakers voted in favor of the plan's progression, they would have then began debating whether Obama should be able to "fast track" the bill, meaning approve it without the legislature's passage.