A trade pact among Pacific-region nations should include provisions to prevent currency manipulation, Representative Sander Levin said, siding with U.S. automakers in expressing concern about Japan’s economic policies as the nation formally joins the talks.
“We need an enforceable obligation to avoid manipulating exchange rates,” Levin of Michigan, the top Democrat on the House Ways & Means Committee, said today in remarks for a speech at the Peterson Institute for International Economics in Washington.
The provision is included in a broader plan Levin unveiled to encourage Japan to open its auto sector to more foreign competition.
Japan today joins 11 nations working to create the Trans-Pacific Partnership, a free-trade zone that would link an area with about $26 trillion in annual economic output. Japan’s participation has rankled U.S. automakers, who say the Tokyo government’s policies favor domestic manufacturers, and environmental groups, who say the Asian nation’s need for liquefied natural gas will lead to more drilling in the U.S.
The American Automotive Policy Council, an industry group that represents Ford Motor Co. (F), General Motors Co. (GM) and Chrysler Group LLC, has said it won’t support the TPP unless it contains a currency provision. The group said today that more than 80,000 U.S. auto-industry workers have signed a petition to Congress on the issue.
“To avoid locking in one-way trade and rewarding currency manipulation, the TPP must require Japan to fully open its market to competition and include strong and enforceable currency rules to prevent subsidies for Japanese automakers,” Matt Blunt, president of the U.S. industry group, said in a statement.
U.S. automakers have said Japan’s market remains too closed to imports and that policies by Prime Minister Shinzo Abe’s government have weakened the yen, giving Japanese exporters an unfair advantage over foreign competitors.
The yen, trading at 99.55 per U.S. dollar at 2:35 p.m. in New York, has declined 21.4 percent against the dollar in the past year.
While the U.S. Treasury Department hasn’t labeled Japan a currency manipulator, it has called on the government in Tokyo to refrain from devaluing the yen for competitive reasons.
“They’re not manipulating their exchange rate,” Federal Reserve Chairman Ben Bernanke said of Japan in testimony before the House Financial Services Committee on July 17. “What they’re doing is engaging in strong domestic monetary policy measures, trying to break the deflation that they’ve had for about 15 years. And a side effect of that is that the yen has weakened.”
Bernanke said it was in the U.S. interest to see Japan’s economy improve.
Levin said the elimination of U.S. tariffs on Japanese auto imports, which President Barack Obama’s administration and Japan announced in April as part of a plan to bring Japan into the talks, should be tied to the nation opening its markets. The TPP should also deal with future trade barriers, he said.
“If the Obama administration is serious about growing manufacturing jobs and signing a high-standard Trans-Pacific Partnership trade agreement, it will adopt these ideas as its bottom-line negotiating position moving forward,” Scott Paul, president of the Alliance for American Manufacturing, said in a statement. The Washington-based, non-profit group includes U.S. manufacturers and the United Steelworkers union.
Japan’s inclusion in the talks may make it easier for the nation to import liquefied natural gas from the U.S., according to the Sierra Club, a San Francisco-based environmental group that opposes hydraulic fracturing, or fracking, for natural gas.
Companies including Dominion Resources Inc. of Richmond, Virginia, are awaiting Energy Department approval to export the product. Gas exports to most nations with U.S. free-trade agreements are largely exempt from Energy Department clearance.
The TPP may weaken the U.S. government’s ability to manage exports of LNG, according to Ilana Solomon, the Sierra’s Club’s trade representative in Washington.
“American families and communities cannot afford the unchecked exports of fracked gas to Japan,” she said. The group has said fracking jeopardizes water and air quality.
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