By William Mauldin
The White House on Tuesday threatened to veto a crucial trade
bill if it contains legislation with binding punishments for
currency manipulation, the main point of contention between
President Barack Obama and congressional critics of his trade
policy.
Treasury Secretary Jacob Lew called the bipartisan currency
measure a "poison pill" that could sink the proposed 12-nation
Trans-Pacific Partnership pact if it is included in legislation
needed to complete and win passage of the deal.
"If a trade agreement is required to come back with a currency
discipline that is enforceable through trade mechanisms, I don't
think there is another country in the world that would agree to
that," Mr. Lew said at a Bretton Woods Committee conference in
Washington. "It's a poison pill in terms of getting agreement on
TPP."
Backed by Ford Motor Co. and other lawmakers, Sen. Rob Portman
(R., Ohio) and Sen. Debbie Stabenow (D., Mich.) have proposed an
amendment to so-called fast-track trade legislation that would
press the administration's negotiators to include enforceable
currency rules in the Pacific pact.
Mr. Portman rejected the "poison pill" label Tuesday, saying the
amendment was "a vitamin" that would strengthen the U.S.'s
negotiating objective on currency, in addition to other objectives
Congress is setting for the administration in the Pacific deal.
He said he would be "really surprised" if Mr. Obama vetoed fast
track over the measure.
Granting the president fast-track authority would allow him to
complete negotiations on the Pacific pact and then present it to
Congress for an up-or-down vote, without amendments.
But the White House and Mr. Lew warned that Mr. Obama could veto
the entire fast-track bill if Mr. Portman's language is included.
The bill, also known as trade promotion authority, could go to a
full Senate vote this week.
"The president would certainly not support that kind of a
provision and would even take the extraordinary step of vetoing the
TPA bill if this amendment were added," said White House spokesman
Josh Earnest, adding that the amendment would "interfere with the
ability of the Federal Reserve to implement monetary policy."
The majority of Republican lawmakers who back Mr. Obama on the
trade legislation and the Pacific trade deal also don't want to see
it torpedoed by the currency rules.
"Most of my members are opposed to it," Senate Majority Leader
Mitch McConnell told reporters at the Capitol. "We'll be working
hard to keep any amendments off the bill that would defeat the
bill."
With tariffs already low, many lawmakers, including most
Democrats, have expressed interest in rules that would punish
countries that take unacceptable steps to cheapen their currencies
to gain a trade advantage, which could amount to a bigger boost
than what companies achieve through lower tariffs in
agreements.
But defining currency manipulation is tricky, not to mention
identifying the intent of monetary policy makers responding to a
variety of factors besides trade.
In the longer term, officials warn such rules, even if narrowly
tailored, could open a can of worms that puts U.S. monetary policy,
including the Fed's quantitative easing, under international
scrutiny.
Besides the Portman-Stabenow amendment, the administration has
criticized another measure backed by Sen. Chuck Schumer (D., N.Y.)
that would allow U.S. industry to petition for punitive tariffs to
be imposed on rivals that have benefited from alleged currency
manipulation. That measure is part of a separate customs
enforcement bill with many provisions that Mr. Obama, the GOP and
Democratic leaders support.
Mr. Obama last week signaled he is open to some new efforts to
crack down on currency shenanigans abroad, and on Tuesday the White
House reiterated that it backs "constructive tools to address
unfair currency practices."
Mr. Lew supports an amendment on currency backed by Sen. Michael
Bennet (D., Colo.).
Ian Talley contributed to this article.
Write to William Mauldin at william.mauldin@wsj.com
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