Yellen Declines to Directly Address TPP Currency Impacts During Hearing
Rep. Gary Peters, D-Mich is concerned with giving Trade Promotion Authority for the Trans-Pacific Partnership (TPP) and will oppose such legislation unless currency manipulation is addressed in strong, enforceable fashion, he said during a Feb. 11 hearing. The House Committee on Financial Services hearing, focused on monetary policy, included testimony from new Federal Reserve Chairwoman Janet Yellen. Peters cited recent Census Bureau statistics that show the 2013 deficit with South Korea was the highest on record, at $20.7 billion, after two years of the U.S.-South Korea free-trade agreement (here).
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“Just last week, as you know, new data came out showing that two years after the Korea-U.S. free trade agreement was passed we have now a record trade deficit with Korea. In fact our trade deficit with Korea has increased 56 percent since 2011,” said Peters. “Congress, I believe, can’t ignore the impacts of trade agreements on our middle class. I voted against the Korea free trade agreement and I now oppose giving fast-track authority for the Trans-Pacific Partnership, unless that agreement includes strong, enforceable mechanisms to address currency manipulation.”
The inclusion of Japan in TPP negotiations is particularly worrisome, considering Japanese devaluation of the Yen is enabling Japanese auto makers to fetch particularly high prices for autos, said Peters. “The Yen recently hit a five year low against the dollar and today’s monetary policy report notes that the dollar has appreciated sharply against the Japanese yen since October. It is estimated that the recent fall in the yen puts roughly $2,000 per export vehicle into the pockets Japan’s automakers -- a significant disadvantage for our local companies,” said Peters. “In this increasingly interconnected global economy, monetary policy, facilitating the direct manipulation of currency, I believe simply cannot be tolerated.”
Yellen declined to address directly the impact Japanese currency intervention is having on the U.S. economy, while noting foreign countries have the right to rectify downward trends in domestic growth. “Japan has had almost 20 years of deflation -- mild but chronic and debilitating deflation. And I think its natural and logical that, after such a long period of deflation, the government and the bank of Japan should want to put in place a set of policies to end that,” said Yellen. “To the extent that they’re successful and Japan grows more quickly, I think that will be something that will rebound to the benefit of Japan’s neighbors. If Japan has stronger domestic spending … growth, there will be benefits throughout the global economy. But there are exchange rate implications of those policies as well.”