Spotlight: Currency debate on Capitol Hill threatens Obama's trade agenda

Currency became a hot topic of debate on Capitol Hill in the past two days as U.S. lawmakers considered moving forward President Barack Obama's ambitious trade agenda by passing the so-called fast-track legislation.

The fast-track legislation, formally known as trade promotion authority (TPA), empowers the president to negotiate trade deals and then present them to Congress for up-or-down votes, with no amendments allowed.

If the legislation is passed by Congress, it will give U.S. trading partners the confidence they need to put their best offers on the table and help the Obama administration conclude the ongoing Trans-Pacific Partnership (TPP) free trade talks, which are nearing completion after more than five years of negotiations.

Republicans who are now in control of both chambers of Congress have indicated that they are willing to grant the president the fast-track authority, but he faces stiff opposition from liberal Democrats and activists from labor unions, who are skeptical that trade deals have hurt U.S. workers and increased income inequality.

The House Ways and Means Committee on Thursday approved the TPA legislation, with 25 votes in favor and 13 against votes, and only two of the panel's 15 Democrats favored the legislation, highlighting the difficulty Obama still has with winning support within his own party.

A bipartisan group of lawmakers is ramping up pressure on the Obama administration to introduce enforceable provisions against currency manipulation into the TPA and trade agreements, arguing that addressing currency concerns could help boost U.S. export competitiveness and pave the way for passage of TPA and trade agreements through Congress.

"Adding currency language that is enforceable will actually pick up votes," said Senator Debbie Stabenow, a Democrat from the state of Michigan, who on Wednesday offered an amendment addressing currency manipulation to the TPA legislation together with Republican Senator of Rob Portman from the state of Ohio.

"Without strong currency enforcement, it will not have my vote, " said Stabenow, who represents U.S. auto manufactures' interests, worried about sharp depreciation of Japanese yen and fierce competition from Japanese auto makers.

But other lawmakers and the Obama administration have warned that it would be "counter-productive" to include enforceable currency provisions in trade agreements, as it could derail the president's trade agenda.

"Given the deep reservations held by our trading partners, seeking enforceable currency provisions would likely derail the conclusion of the TPP," U.S. Treasury Secretary Jacob Lew told the House Ways and Means Committee Wednesday.

In a letter to high-ranking lawmakers Tuesday, Lew said consultation with other TPP countries showed that "they will not support the introduction of enforceable currency provisions in the context of trade agreements, and specifically, the TPP."

Senate Finance Committee Chairman Orrin Hatch on Wednesday warned that "you could kiss TPP goodbye" if the amendment addressing currency manipulation to the TPA legislation passes. Luckily, it was defeated by the Senate Finance Committee with a vote of 11 to 15.

The currency battle, however, isn't over.

As the House and Senate are likely to bring the TPA legislation to the floor early next month, fighting over trade and currency issues will remain tough.

"I will continue to fight to get it included in TPA when it moves to the Senate floor," said Portman, the Ohio Republican who used to serve as U.S. Trade Representative and is seeking a reelection to the Senate in 2016.

It will "delay the opportunity to conclude the TPP or completely derail" the trade talks if currency manipulation provisions are included in trade agreements, Tony Fratto, a partner at Hamilton Place Strategies and former deputy White House press secretary, told Xinhua Friday after a panel discussion at the Washington-D.C. based Woodrow Wilson Center.

Fratto believed currency manipulation issues "become less and less important" as major economies have recognized the benefits of more flexible currency and significant costs associated with using currency as a tool to expand trade. In his view, such currency manipulation provisions could also be used by other countries to challenge the Federal Reserve's controversial quantitative easing policies, the large-scale bond-buying programs which pushed down the value of U.S. dollar, as other countries has "their own views on the definition of currency manipulation."

Fed Chair Janet Yellen had expressed similar concerns. "I would really be concerned about a regime that would introduce sanctions for currency manipulation into trade agreements when it could be the case that it would hamper or even hobble monetary policy," Yellen told Congress in February.

The Obama administration has insisted that the G20, G7 and the International Monetary Fund (IMF) are better suited to deal with currency issues.

Meg Lundsager, a scholar at the Woodrow Wilson Center and former U.S. executive director for the IMF, told Xinhua Friday that the IMF has done a much better job of surveillance over members' exchange rate policies, adding that making the surveillance more publicly available could help introduce peer pressure to address currency concerns.

Adam Posen, president of the Peterson Institute for International Economics, also said including currency provisions in trade agreements is "a terrible idea" as it threatens to "blow up" the Asia Pacific trade deal.

It would have a big impact on current TPP negotiations whether the TPA legislation could eventually get enough votes for passage in both chambers of Congress or not.

President Obama will host Japanese Prime Minister Shinzo Abe for an official visit to Washington next week, and the two leaders will discuss progress in bilateral market access negotiations over agriculture and autos, which are crucial to the conclusion of the broad TPP negotiations.

White House deputy national security adviser Caroline Atkinson told reporters Friday that U.S. and Japan are not expected to announce a final deal of bilateral TPP negotiations during Abe's visit as "we still have some work to do." Endite