NFU president: ‘Free-trade agenda’ plagued by currency manipulation

December 08, 2015


Roger Johnson, National Farmers Union President, was the featured speaker at the Nebraska Farmers Union's 2015 state convention on Saturday at the Midtown Holiday Inn.

[ by Robert Pore | December 5, 2015 | The Independent ]

For Roger Johnson, president of the National Farmers Union, trade should be looked at from the perspective of balance and not strictly what’s deemed free and fair.

Johnson was speaking at the Farmers Union’s state convention in Grand Island.

One of the topics discussed by Johnson and Nebraska Farmers Union members was the Trans-Pacific Partnership Agreement (TPP), a free-trade agreement negotiated by the United States, Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.

When it was negotiated and released more than a month ago, Johnson said the agreement, which must be approved by Congress, was more than 6,000 pages long.

“What is amazing to me in those 6,000-plus pages of stuff that we have agreed to is that we don’t agree to deal with the single most biggest problem that we all know we have with all the trade agreements we have entered into,” Johnson said. “And that problem is currency manipulation.”

Currency intervention — also known as foreign exchange market intervention, or currency manipulation — occurs when a government buys or sells foreign currency to push the exchange rate of its own currency away from equilibrium value.

John Hansen, president of the Nebraska Farmers Union, said the “free-trade agenda” promoted by the U.S. has been nothing more than an “ideology” that has resulted in the huge U.S. trade deficit that has grown to more than $9 trillion in the last 21 years.

According to the website, Industry Week, the United States has a trade deficit with 88 countries. It said the Census Bureau reported that the top seven trading partners — Canada, China, Mexico, Japan, Germany, South Korea and the United Kingdom — represented 50.9 percent of the country’s total trade deficit, which was $461.3 billion for January–November 2014. Canada, Mexico and Japan are part of the TPP agreement. The article also said that since the Korean and U.S. free trade agreement went into effect in 2012, our trade deficit with South Korea has increased by more than 60 percent.

In total, Johnson said the 2014 trade deficit was more than $500 billion, about 3 percent of the U.S. GDP.

“Our economy would be humming a whole lot more strongly today if we just had balanced trade,” he said. “If we continue down this path of doing trade at all costs and say we don’t care if it is a deficit or a surplus, that is absolutely the wrong attitude.”

Johnson said China has a trade surplus every year while the U.S. digs a “deeper hole” with its deficits. He said the reason why China has a trade surplus is “currency manipulation.”

“They deliberately go into the U.S. dollar market, buy dollars for the purpose of making the products that China sells cheaper to the U.S. and, at the same time, making the products that the U.S. sells more expensive to the rest of the world,” he said.

Johnson called that “cheating.”

“It is not free trade,” he said. “It is manipulated trade and China is the biggest manipulator. But there are a lot of other ones, including those in the TPP — Malaysia, Japan, Vietnam, all known currency manipulators — and in the 6,000 pages of the TPP you don’t think our trade negotiators could have figured out a provision in there that said, ‘If you manipulate currency, we are going to apply sanctions back against you,’ because by definition that should be anti-free trade.”

He said currency manipulation is not addressed in TPP, which a majority of House and Senate members wanted as fast-track authority.

“The administration opposed it and the president would have vetoed it if it was put in,” Johnson said. “It is a huge, huge missed opportunity. Until we figure out how we are going to deal with our trade deficit, and the biggest contributor it to it, currency manipulation, we are just going to continue down the negative road of building deeper and deeper trade deficits and continue to struggle economically.”

Johnson said there are many good provisions in TPP, especially for agriculture, which he said contributes positively to U.S. trade by exporting more agricultural goods than the country imports, which creates a trade surplus.

“That is a positive for our economy, but the problem is the rest of the U.S. economy contributes a huge deficit, which wipes out the small ag surplus that is created, and we all end up suffering as a result,” he said.

An example of the TPP agreement and agriculture is that Japan has agreed to lower its tariffs on U.S. beef exports. Overall, Johnson said, Japan has a weighted average tariff of about 2.5 percent on all goods the U.S. sells to them.

That is the “tax” that Japan applies to all the stuff the U.S. sells to them, Johnson said. But even if those tariffs were totally eliminated, Japan could still manipulate its currency that would make the costs of U.S. exports higher and Japanese products imported to the U.S. cheaper.

Johnson said the real entities taking advantage of these differing trade arrangements are multinational corporations doing business in those countries.

“You provide an advantage to one country over the other, and what happens is this international corporation simply moves more of its operations to the country that has the advantage and deploys them away from the country that has the disadvantage,” Johnson said.

“That, unfortunately, has been the result in most trade agreements that we have entered into. We promise more jobs and economic growth and what happens? It is the exact opposite.”

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