WASHINGTON (MarketWatch) — Rep. Sander Levin says he respects Federal Reserve Chairwoman Janet Yellen, but on one particular issue, she’s wrong.
[Reposted from MarketWatch | Robert Schroeder | February 26, 2015]
“We need to face up to this basic issue,” Levin, a Michigan Democrat, says about including currency obligations in trade deals — specifically, the Trans-Pacific Partnership. The U.S. and 11 other Pacific Rim nations are now trying to agree to the final terms of that trade partnership.
“Currency impacts jobs,” Levin told MarketWatch in an interview. “Currency should not be the tool of one country against another.”
Levin, the top Democrat on the House Ways and Means Committee, spoke with MarketWatch on Thursday about Yellen’s opposition to currency-manipulation language in trade agreements; the status of talks on both trade promotion authority and the Trans-Pacific Partnership; and why he believes Congress needs “leverage” over the contents of trade deals. Trade promotion authority, or fast track, would let the president negotiate trade deals Congress could not amend.
Here is a condensed and edited Q&A between Levin and MarketWatch:
MarketWatch: There have been reports negotiators are getting close to a deal on trade promotion authority. What do you know about the status of a TPA deal — and also, how much work remains on the Trans-Pacific Partnership?
Levin: I don’t know the status; you hear different stories every day. I think the key is what’s being negotiated in TPP. That’s the real issue. It would cover 40% of the GDP of the world and include, now, Japan. It would include new economies with whom we’ve never negotiated a trade agreement. And there are issues that have never really been seriously considered in multilateral agreements — for example, state-owned enterprises. And also, while there have been through our efforts basic labor and environmental provisions — the “May 10” standard that essentially was written by some House Democrats — while that is now in the negotiation mix, how it would be implemented is also critical.
This is an important negotiation and it’s really vital to get it right. Negotiations can go both ways in trade; it isn’t automatic that trade is a plus. It can be a plus if it’s shaped the correct way; it can be a minus if it isn’t. So I think the appropriate focus at this point needs to be on the contents of TPP, where it is, where it’s short, and where it can be made better and involving in a meaningful way Congress as a partner.
MarketWatch: Looking back at past trade deals, critics say NAFTA, for example, allowed American jobs to be shipped overseas. So how do you make the case that deals like the TPP would be good for the middle class?
Levin: It depends how it’s shaped. Recent studies showed that between 1999 and 2011, over two million jobs were lost because of import competition from China. China’s not in this [TPP] directly, but some of the issues that are being negotiated would eventually have some impact on issues relating to China — for example, currency.
What is not always understood is that Congress has had a major role in shaping trade agreements, and sometimes through negotiation. As I mentioned, it was a number of us, a few of us, really, House Democrats with the support of other Democrats that essentially put together the May 10 agreement on labor, on environment, on medicines, that became part of the Peru [free trade agreement] that also was negotiated directly between some of us in the House on the Democratic side and the Peruvian government.
Negotiations should go on through the [United States Trade Representative] when it’s willing to tackle these issues. The real question becomes, what is the likely product of these negotiations, in this case led for the U.S. by the USTR, but there has to be this active bipartisan partnership in the Congress. And we should not relinquish that role until we really have a very clear idea as to the likely outcomes.
MarketWatch: This week, Fed Chairwoman Janet Yellen came out against putting currency-manipulation language in trade agreements. You’ve called for including it. Does her opposition make your case harder?
Levin: Traditionally, Treasury Departments and the Federal Reserve have been opposed to including provisions on currency in trade agreements. The problem with that is that currency has had a major impact on trade flows. That was true in Japan in the 90s, when they rigged their currency, and that had a major impact on middle-class jobs in this country.
I think there’s no question that China has manipulated its currency for a number of years. [There’s a] recent study by David Autor and others — it had its impact on jobs in the United States. We understand the hesitation. We want to be clear that the inclusion of currency is done in the right way. The [International Monetary Fund] has very much put forth definitions of what is manipulation and what is not. What are effective domestic policy considerations like quantitative easing, and those are different from manipulation.
So I respect very much the Federal Reserve chair but we need to face up to this basic issue, since currency impacts jobs, impacts middle class jobs. Currency should not be the tool of one country against another.
MarketWatch: Traditionally, lawmakers have had the most concern about China and currency manipulation. But China isn’t part of the TPP — are there other countries that are worrisome to you that would be involved in the TPP?
Levin: Japan has a history of currency manipulation. And you know, it isn’t as if currency manipulation has never been part of a trade agreement. And it’s not as if the U.S. never labeled another country as a currency manipulator. That happened in the past. The problem was when Japan did so in the 90s, especially, there was a hesitation by Treasury to say it clearly and act effectively. And then the economy of Japan went down and Treasury said to me, you were probably right back then but it’s now too late.
With China, there have been efforts, jawboning efforts, by our administration, by the previous and the present administration, and our Treasury secretary. I’m very close to [Treasury Secretary] Jack Lew. But the problem is this: for too long, China manipulated their currency, as this study shows, having a major effect on imports.
In order to shape trade agreements, you have to look not only at exports but also at imports and what the mix of them will mean. Japan has had a major, major one-way street with us. They’ve had total access for their exports, and we’ve had no meaningful availability in the auto industry to export our products there. And they have been very tight in terms of our agricultural exports. That has to change.
MarketWatch: You have called for lawmakers and staff to be allowed to read the administration’s negotiating proposals in the TPP. What is the latest on this? Are you being offered any guarantees of full access to the text?
Levin: There’s movement here. We have urged the administration to let congressional staff as well as members look at the full text, and also to be able to look at it in a way so we know what various countries have offered and not just what the text says.
There’s some progress. I think the transparency issue is important, but it’s also important for us to, when we see, as we should, we should see where things are, but also when you look at the present text you can’t see where things are going. You don’t really know what the likely outcomes are. So transparency is important. I’ve been pressing it. But also vital is to have some very clear idea as to where these negotiations on these key issues are likely to go.
MarketWatch: The Obama administration wants TPA from Congress to help quickly pass the Trans-Pacific Partnership. Yet you have said the focus should be first on the TPP. Why not give the administration what it wants?
Levin: Right now, the focus has to be on the substance of what’s being negotiated. Congress has played such an important role in recent decades in shaping trade policy, and we should not relinquish that role when there are so many outstanding issues to be addressed. We need to keep that leverage.