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Hatch: Overreaching Currency Amendment Threatens Viability of TPA and the American Economy
In a Speech on the Senate floor, Utah Senator Says, “The Obama Administration has made it abundantly clear that, if this amendment gets adopted, President Obama will veto the TPA bill.”
WASHINGTON – In a speech on the Senate floor today, Finance Committee Chairman Orrin Hatch (R-Utah) outlined how an overreaching currency amendment proposed to the Congressional Trade Priorities and Accountability Act of 2015 (TPA 2015) threatens the workability of Trade Promotion Authority and the health of the American economy.
“Existing standards for determining what is and what is not currency manipulation are flimsy and ill-defined. It would be very, very dangerous to subject U.S. monetary policies to enforceable rules based on these standard. Experts in economic policy have cautioned against requiring enforceable currency standards in our trade agreements that are subject to sanctions,” Hatch said. “And they all noted that such an approach would hinder our own economic policies.”
Hatch went on to detail how a counter amendment offered with Finance Committee Ranking Member Ron Wyden (D-Ore.) would address currency manipulation in a responsible manner that doesn’t threaten to jeopardize closing high-standard trade agreements and the health of the American economy.
“The Hatch-Wyden Amendment would put a number of tools at our disposal to fight currency manipulation, including enhanced transparency, disclosure, reporting, monitoring, cooperative mechanisms, as well as enforceable rules,” Hatch continued. “The Hatch-Wyden Amendment would give us maximum transparency and flexibility to tailor our efforts at addressing currency manipulation.”
Given the overwhelming opposition to an unworkable currency amendment and the threat of a veto, Hatch called on his colleagues to vote against the overreaching currency amendment and for the Hatch-Wyden proposal.
“Even if you think the President is blowing smoke when he says he’d veto any TPA bill that includes [an unworkable currency amendment], that is no reason to vote in favor of the amendment. Our alternative approach represents a better solution to a serious problem,” Hatch said.
The complete speech, as prepared for delivery, is below:
Mr. President, later today, the Senate will vote on the Portman-Stabenow currency manipulation amendment.
Up to now, we’ve all heard more than our fair share of arguments about this amendment.
I want to take a few more minutes today to express my opposition to the Portman-Stabenow Amendment and to explain to my colleagues why they should vote against it.
I want to reiterate, Mr. President, that the Obama Administration has made it abundantly clear that, if this amendment gets adopted, President Obama will veto the TPA bill. So, as I’ve already said a number of times, a vote for the Portman-Stabenow Amendment is a vote to kill TPA.
I know that all of my colleagues are aware of the statements made by Secretary Lew and the White House on this matter. I also know that a number of my colleagues who support Portman-Stabenow have said that they don’t believe the President would veto the TPA bill over this amendment.
Let’s say, for the sake of argument, that they’re right. Let’s assume that the administration is bluffing.
Should we call that bluff? Should we pass the amendment and dare the President to make good on his veto threat?
The answer to that question, Mr. President, is an emphatic NO.
Even if you take veto threats and administration statements of opposition completely out the equation, one fact still remains: the Portman-Stabenow Amendment is bad policy for America and is far too risky.
Earlier this week, I laid out four separate negative consequences that would result from the Portman-Stabenow Amendment. I’d like to reiterate those concerns here today.
First, the Portman-Stabenow Amendment would derail the Trans-Pacific Partnership. Once again, we know that this is the case.
None of our negotiating partners would sign a trade agreement that included the kinds of rules mandated by the Portman-Stabenow Amendment. We’ve already heard from countries like Japan that they would walk away from the agreement if the U.S. started making these types of demands.
Furthermore, the U.S. would never agree to these types of demands either.
What country would willingly sign a trade agreement that would subject their monetary policies to potential trade sanctions? No country that I’m aware of.
I’ve heard some of my colleagues respond to these claims the same way they respond to the President’s veto threat. They don’t believe Japan when they say they’ll walk away from the TPP. Or, they say that any country refusing to accede to these types of standards must be planning to manipulate their currency.
Now, I’m all for healthy skepticism. But, maybe – just maybe – if our government as well as all of our negotiating partners all say that Portman-Stabenow is bad policy that they can’t sign onto, there’s something to those claims.
And, guess what, Mr. President, there is something to them, which brings me to the second negative consequence that we’d see under the Portman-Stabenow Amendment: it would put the Federal Reserve’s independence at risk and subject our own monetary policies to trade disputes and possible sanctions.
Once again, we have colleagues here in the Senate who have simply decreed here on the floor that U.S. monetary policy is aimed at purely domestic objectives, and it is only OTHER countries that manipulate their currencies to gain trade advantage. But, anyone whose paid attention to these issues knows that not all of our trading partners share that assessment. Other countries have already accused the U.S. of currency manipulation and the Portman-Stabenow Amendment would set forth a clear and accessible process for turning those accusations into trade disputes subject to possible sanctions.
We may not agree with those allegations against U.S. monetary policy – I certainly don’t. The problem is that the Portman-Stabenow Amendment would take those determinations out of our hands and give them over to international trade tribunals.
At this point, the proponents of this amendment will likely point out that they’ve included language to exempt “the exercise of domestic monetary policy” from the enforceable rules mandated by the amendment. But, with all due respect to the authors of the amendment, that’s a red herring.
Keep in mind that the U.S. dollar is a global currency, the primary reserve currency in the world. That being the case, our nation’s monetary policies necessarily have a global impact, making it very difficult to determine what constitutes purely domestic monetary policy and what is meant to be international. And, once again, under this amendment, that extremely difficult determination will not be made here in the U.S., but by international trade tribunals.
We also need to keep in mind that, under currently available economic models and methodologies, it is virtually impossible to definitively measure currency manipulation. There is no clear and obvious threshold at which anyone can, with certainty, declare that a country’s currency has been manipulated.
Most like to point to the standards set by the International Monetary Fund. However, even their formulations have been unable to determine currency manipulation with any level of specificity.
For example, IMF models recently showed that, in 2013, Japan’s currency was anywhere between around 15 percent undervalued and 15 percent OVERvalued.
In other words, existing standards for determining what is and what is not currency manipulation are flimsy and ill-defined. It would be very, very dangerous to subject U.S. monetary policies to enforceable rules based on these standards. Yet, that’s precisely what the Portman-Stabenow Amendment would do.
Third, under the Portman-Stabenow Amendment, the traditional role of the U.S. Treasury in setting U.S. exchange rate policies would be watered down and potentially overruled in international trade tribunals. Thus, adoption of the Portman-Stabenow negotiating objective cedes independence and full authority over, not only monetary policy for the Federal Reserve, but also over exchange rate policy for the Treasury.
Fourth, the Portman-Stabenow Amendment would deal a serious setback to ongoing efforts to fight currency manipulation by encouraging our trading partners to evade regular reporting and transparency of exchange rate policies. If currency standards become enforceable and immediately subject to sanctions under a trade agreement, parties to that agreement would almost certainly start withholding full participation in reporting and monitoring mechanisms that are designed to uncover and combat currency manipulation.
Put simply, we cannot enforce rules against unfair exchange rate practices if we do not have information about them. The Portman-Stabenow Amendment would make it far more difficult to obtain that type of information. Their approach would push currency manipulation practices into the shadows, as countries would fear being hit with trade sanctions if a trade tribunal – once again using ill-defined standards – deems their policies to be manipulative.
As you can see, Mr. President, concerns about the Portman-Stabenow Amendment extend well beyond veto threats. Indeed, even if no veto threats had been issued – and, make no mistake, they have definitely been issued – there are enough problems inherent in the approach taken by this amendment to warrant opposition on its own.
You don’t have to take my word for it, Mr. President. Every living former U.S. Treasury Secretary – both Republicans and Democrats – has expressed opposition to the approach taken by the Portman-Stabenow Amendment. During the Finance Committee’s consideration of the TPA bill, Congress received a letter signed by Tim Geithner, Hank Paulson, John Snow, Paul O’Neil, Larry Summers, Robert Rubin, Nicholas Brady, James Baker, Michael Blumenthal, and George Schultz stating, among other things, that “it is impossible to get agreement on provisions that subject currency manipulation to trade sanctions in a manner that both the United States and other countries would find acceptable.”
It is “impossible.” That’s their word, Mr. President, not mine.
We also received a letter from 14 former Chairs of the Council of Economic Advisors, again both Republicans and Democrats, expressing similar views. The letter was signed by Alan Greenspan, Ben Bernanke, Charles Schultze, Martin Feldstein, Laura D’Andrea Tyson, Martin Baily, Glenn Hubbard, Austan Goolsbee, Alan Krueger, Christina Romer, Edward Lazear, Harvey Rosen, and Greg Mankiw.
All of these leaders – these experts in economic policy – have cautioned against requiring enforceable currency standards in our trade agreements that are subject to sanctions. And they all noted that such an approach – which would be required under the Portman–Stabenow Amendment – would hinder our own economic policies.
Our current Secretary of Agriculture said much the same thing in a letter this week. In his letter, Secretary Vilsack stated: “enacting a TPA currency discipline that requires an enforceable negotiating objective would likely derail our efforts to complete the Trans Pacific Partnership and cause us to lose ground on holding countries accountable on currency.”
He continued, arguing: “An enforceable currency provision in our trade agreements…could give our trading partners the power to challenge legitimate U.S. monetary policies needed to ensure strong employment and a healthy, robust economy.”
We’ve also heard from leaders in the business community. In fact, we’ve received letters signed by almost every major business association in the country – including the U.S. Chamber of Commerce, Business Roundtable and countless others – weighing in either against the Portman-Stabenow Amendment, in favor of the Hatch-Wyden alternative, or both.
We’ve heard the same from agricultural organizations, including the American Farm Bureau, the National Pork Producers Council and many, many others.
In short, both the business and agricultural communities overwhelmingly – OVERWHELMINGLY – oppose Portman-Stabenow.
This isn’t about politics, Mr. President. This is about sensible policy.
Now, I’m not arguing that we shouldn’t do anything about currency manipulation. Senator Wyden and I have introduced an alternative amendment that would take a much more sensible and effective approach to deal these issues.
The Hatch-Wyden Amendment would put a number of tools at our disposal to fight currency manipulation, including enhanced transparency, disclosure, reporting, monitoring, cooperative mechanisms, as well as enforceable rules.
The Portman-Stabenow Amendment provides a single tool: enforceable rules, subject to trade sanctions. And, this single tool is grossly unreliable and poses a serious threat to U.S. interests.
The Hatch-Wyden Amendment would give us maximum transparency and flexibility to tailor our efforts at addressing currency manipulation.
The Portman-Stabenow Amendment would tie our hands and give us no other option than to subject our trading partners and ourselves to potential sanctions based on unreliable, indefinite standards.
The Hatch-Wyden Amendment would preserve the integrity of our current trade negotiations.
It would pose no threats to the independence of the Federal Reserve and would not subject our own monetary or exchange-rate policies to the whims of an international trade tribunal.
And, it would increase transparency and accountability of our trading partners’ currency practices.
In pretty much every way, Mr. President, the Hatch-Wyden Amendment provides a better approach to dealing with currency manipulation than the one offered by the Portman-Stabenow Amendment.
So, once again, even if you think the President is blowing smoke when he says he’d veto any TPA bill that includes Portman-Stabenow, that is no reason to vote in favor of the amendment. Our alternative approach represents a better solution to a serious problem.
I urge my colleagues to oppose the Portman-Stabenow currency amendment and support the Hatch-Wyden alternative.
I yield the floor.
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