Dean Baker- Obama is failing us all by ignoring the need for currency rules in TPP

[n2doc]

The Obama administration is doing its full court press, pulling out all the stops to get Congress to approve the fast-track authority that is almost certainly necessary to get the Trans-Pacific Partnership (TPP) through Congress. One of the biggest remaining stumbling blocks is that the deal will almost certainly not include provisions on currency. This means that parties to the agreement will still be able to depress the value of their currency against the dollar in order to gain a competitive advantage. This is a really big deal, which everyone thinking about the merits of the TPP should understand.

The value of the dollar relative to other currencies is by far the main determinant of our balance of trade. We can talk about better education and training for our workforce, improving our infrastructure and better research, all of which are important for the economy.

But anyone who claims that improvements in these areas can offset the impact of a dollar that is overvalued against another currency by 15-20% is out of touch with reality. If the dollar is overvalued by 20% against another country’s currency, it has the same effect as imposing a 20% tariff on US exports and giving a government subsidy of 20% to imports.

This is the direct effect when other countries deliberately buy up US assets to prop up the dollar against their currency. This is the main reason the United States is currently running a trade deficit of more than $500bn a year.


more

http://www.theguardian.com/commentisfree/2015/apr/22/obama-ignoring-currency-rules-trans-pacific-partnership

Add it to the pile of things wrong with the TPP

[Hoyt]

1. Not sure Obama is ignoring it, but I guess Clinton gets kudos for bringing that up as one of the

goals TPP needs to accomplish.