Trans-Pacific Partnership, currency manipulation, trade, and jobs

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The Trans-Pacific Partnership (TPP) agreement between the United States and 11 other Pacific Rim countries lacks an absolutely key component to keep it from doing potential damage to the U.S. economy. The missing piece of this trade and investment deal is a set of restrictions and/or enforceable penalties against member countries that engage in currency manipulation. Currency manipulation is one of the key driving forces behind the high and rapidly rising U.S. trade deficit with the 11 other members of the TPP. In 2015, the U.S. deficit with TPP countries translated into 2 million U.S. jobs lost, more than half (1.1 million) of which were in manufacturing. Without such provisions against currency manipulation, the TPP could well follow other trade agreements and leave even greater U.S. trade deficits in its wake. 

[Robert E. Scott & Elizabeth Glass| March, 3 2016 |Economic Policy Institute]

Currency manipulation occurs when a country artificially depresses the value of its currency. Currency manipulation acts like a subsidy to the exports of the manipulating country, and a tax on U.S. exports to every country where U.S. exports compete with the currency manipulator’s exports. In this way, currency manipulation increases U.S. imports, suppresses U.S. exports, and inflates U.S. trade deficits. As past EPI research has shown, currency-manipulation-fueled trade deficits have reduced U.S. gross domestic product (GDP), eliminated millions of U.S. jobs, driven down U.S. wages, and propelled the outsourcing of U.S. jobs to currency manipulators.

Many members of the proposed TPP, including Malaysia, Singapore, and Japan, are known currency manipulators. Others, namely Vietnam, appear to be following the lead of currency manipulators by, for example, acquiring excess foreign exchange reserves to depress the value of their currency. Currency manipulation explains a substantial share of the large, persistent U.S. trade deficit with the 11 other TPP countries that has not only cost millions of U.S. jobs but also increased income inequality and put downward pressure on American wages. We can’t afford a trade agreement that not only allows but would intensify these harmful trends:

These stark figures highlight how much damage the U.S. economy and American workers have already suffered from growing trade deficits with TPP member countries.

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