THE NEW YORK TIMES: Debate Over Currency Cheating Intensifies in Trade Talks

05/20/2015

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Debate Over Currency Cheating Intensifies in Trade Talks 

WASHINGTON — Thirty-six years ago, Japan lowered import tariffs on foreign automobiles to zero, ostensibly opening the world’s fourth-largest auto market to full international competition. Yet United States automakers say 93 percent of the cars on Japan’s well-tended roads are still made in Japan by Japanese companies.

Consumers there simply prefer their country’s cars, Japan has said.

Automakers in the United States, however, say something else has long been amiss: the systematic, intentional weakening of the yen by Japanese policy makers, which effectively raised the cost of all kinds of imports, autos included.

With bipartisan momentum building for a currency amendment to the trade bill, President Obama on Tuesday publicly backed a pledge by the leaders of the Senate Finance Committee and Representative Paul D. Ryan of Wisconsin, chairman of the House Ways and Means Committee, to complete a trade policy enforcement bill by next month.

That bill, which passed the Senate last week, contains its own tough currency measure, but Republicans are quietly working to water it down if not remove it altogether. Mr. Obama backed what he called “constructive tools to address unfair currency practices.”

Opponents say the moment for such harsh measures has passed. The last time Japan overtly interfered with its exchange rate was 2011. China’s currency, the renminbi, which was long held down to help the country’s export industries penetrate markets in the United States and elsewhere, has been gaining value against the dollar. And the Obama administration insists its own diplomacy has effectively dealt with the problem.

On Tuesday, citing those gains, Treasury Secretary Jacob J. Lew sent a letter to the bipartisan leadership of the Senate Finance Committee, saying he would recommend that the president veto a trade-promotion authority bill that included a mandated response to currency manipulation.

Yet American politicians, pressed hard by Detroit, say they are not going to give up this chance to finally legislate a solution.

“This is the first time in recent American history that cheating on currency is getting the kind of attention it’s getting now,” said Senator Bob Casey, Democrat of Pennsylvania. “And that’s a good thing.”

The auto market is the No. 1 example of the impact of currency manipulation on American industries. Outside niche auto brands like Lamborghini, no foreign automaker — not Ford, not Mercedes, not BMW, not Hyundai — has a market share in Japan that reflects what it has in the rest of the world, said Stephen E. Biegun, Ford Motor’s vice president for international government affairs.

The Ford Focus has in recent years been the world’s best-selling compact car, with nearly 1.1 million sold in 2013. That year, 800 were sold in Japan.

“Either the Japanese want to pay more and have less choice in the car market, or global manufacturers, when they get to Japan, forget how to make cars,” Mr. Biegun said in a telephone interview on Tuesday. “That strains credulity.”

Currency manipulation extends throughout the Pacific Rim: in Japan, where Tokyo’s central bank has printed more yen to help its slumbering economy grow; in China, where the renminbi has long been fixed to the dollar rather than allowed to fluctuate in response to market forces; and in Malaysia, where the government has intervened to protect the ringgit against currency traders.

The issue has rarely been more relevant to Congress. The Senate is considering extending trade-promotion authority to the president for as long as six years, allowing this administration and the next to negotiate trade deals that could be approved or disapproved by Congress but could not be amended or filibustered.

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