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The drive in Congress to attach a ban on “currency manipulation” to the pending Trans-Pacific Partnership (TPP) is ill-advised and a “poison pill” likely to kill the TPP and other future trade deals, according to Adam S. Posen, president of PIIE. In a session on TPP and Japan at the Institute on March 26, shown here, Posen said accusations that Japan has manipulated its currency in recent years are ill-founded, and that China’s manipulation of ten years ago has ceased because of successful economic diplomacy by the Bush and Obama administrations.
Claims that China, Japan, and other countries have taken unfair advantage of trade and currency rules are overblown, Posen added. Instead of making threats, the United States should persuade countries that suppressing the value of their currencies to gain temporary trade advantages is self-defeating in the long term. The portrayal by many in Congress of the United States as a victim of international economic trends and as exploited by foreign countries is a myth. This unfounded vision should not drive the TPP debate. In fact, American consumers and the United States as a whole have reaped great benefits from engaging in the global economy and having the dollar as the world’s reserve currency.
At the same time, Posen called on Japan to deliver on its promises to lower trade barriers to agricultural products, an essential step for the TPP to be concluded successfully.
