May 20,2015

Wyden Calls for Balanced Approach to Address Currency Manipulation

WASHINGTON – Senate Finance Committee Ranking Member Ron Wyden (D-Ore.) on the Senate floor today discussed why a balanced approach to addressing currency manipulation is important to ensure the U.S. is able to maintain every monetary policy tool at its disposal:

If you’ve read the headlines during this trade debate, you’ve almost certainly read about an issue called currency manipulation. I fully agree with my colleagues who’ve called attention to this issue that our government must do more to target countries that harm the U.S. economy by artificially deflating their currencies.

But I urge this body to carefully consider what the potential solutions to currency manipulation would mean for our country, our workers and our businesses. In the process of taking aim at foreign currency manipulators, Congress must not cause collateral damage for the Federal Reserve and the U.S. dollar. The Federal Reserve uses monetary policy as a tool to stabilize prices and boost employment. The right solution will make sure the U.S. gets the upside of cracking down on currency manipulators, and avoids the downside of restricting our monetary policy toolkit. 

The bipartisan TPA bill before the Senate already includes the first-ever principal negotiating objective related to currency. The amendment Senator Hatch and I have put forward on a bipartisan basis strengthens the negotiating objective in this TPA bill and takes another important step. It directs the Administration to hold our trading partners accountable when they manipulate currencies by using the most effective tools available -- enforceable rules, transparency, reporting, monitoring, and cooperative mechanisms. 

This amendment, in my view, strikes the right balance. It’ll get the upside of confronting unfair currency manipulation. And it’ll avoid the downside of tying our hands with respect to policy options that are completely legitimate and important -- like striving toward full employment. Really, colleagues, this comes down to jobs and economic stability.

In contrast, the Portman amendment unfortunately throws that balance out of whack. Here’s the big difference: With the Portman amendment, the U.S. could be subject to dispute settlement in an international tribunal, which means trade sanctions.

Fed Chair Janet Yellen has expressed serious concern that such a provision could “hamper or even hobble monetary policy.” Chair Yellen’s concern is that because monetary policy can impact currency valuation, the U.S. could end up tying our own hands and taking tools out of the economic toolbox. For example, many countries argued that the Fed’s quantitative easing policy unfairly devalued the dollar.

To be clear, they’re wrong to make that argument. But they want to cry foul and argue that what the Fed did to bring down the unemployment rate was really an unfair way to increase exports. Colleagues, consider what could happen if the U.S. was subject to an international tribunal over this issue.

Taking the wrong path with the Portman amendment would outsource the question of the Federal Reserve’s intent and decision-making to the whims of an international tribunal.

In effect, the Portman currency amendment could be a poison pill to trade agreements.

Just yesterday, Treasury Secretary Lew said he would recommend a veto of a TPA package that included that kind of amendment because it would threaten our ability to respond to a financial crisis.

So it’s absolutely essential to get this right - and make sure that our trade agreements have the upside of being strong on currency, but avoid the downside of restricting our monetary policy tools.

I urge my colleagues to consider the unintended consequences of the Portman amendment. In the extremely unfortunate event of another financial crisis, it will be vitally important to have a full set of tools -- including at the Federal Reserve -- to get our economy moving again and keep workers on the job.

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