WASHINGTON — The White House said Tuesday President Obama will veto Trade Promotion Authority — a measure he needs to advance his own trade agenda — if the Senate passes an amendment that would penalize countries intentionally undervaluing their currencies.
“There is at least one provision that has been floated by Sen. [Rob] Portman [R., Ohio] that would undermine the independence of the Federal Reserve and interfere with the ability of the Federal Reserve to implement monetary policy in a way that is critical to the stability of the U.S. economy,” White House Press Secretary Josh Earnest said at the daily press briefing. “The president would certainly not support that kind of provision and would even take the extraordinary step of vetoing the TPA bill if this amendment were added.”
Portman and Sen. Sherrod Brown (D., Ohio) offered an amendment to the TPA bill that they said would “add explicit and enforceable currency language necessary to ensure that foreign competitors don’t use their exchange rates to subsidize their exports at the expense of products made by American workers.”
The Senate is debating the TPA bill this week and considering several amendments, with the goal of trying to approve the measure before lawmakers break for a weeklong Memorial Day holiday at the end of the week.
TPA allows Congress to set negotiating objectives and consultation requirements for the Executive Branch, but also limits lawmakers to an up or down vote on trade deals. This is seen as vital to completing negotiations on the Trans-Pacific Partnership between the U.S. and 11 other countries, including Vietnam, the U.S.’ second-largest apparel supplier, because it allows foreign governments to make their best offers knowing Congress cannot tear apart a final deal.
The issue of undervalued currencies, dubbed “currency manipulation,” has been a lightning rod in Congress for years, particularly as it relates to China, which critics have repeatedly argued has manipulated its currency to gain a trade advantage on its exports.
The currency issue has also put Obama in a tough spot. If the amendment passes, he could ultimately be forced to block his own trade agenda from advancing.
Earnest said under the direction of Treasury Secretary Jacob Lew, who has also issued strong warnings against including punitive currency provisions in TPA, the administration has had success in pressuring countries like China and Japan to not intervene in their foreign exchange markets. U.S. officials have pursued a diplomatic approach through high level dialogues and at the IMF to prod China and other countries to pursue more market-oriented exchange rates, rather than taking punitive steps.
“And we have had some success. When it comes to China, their currency has appreciated by about 30 percent over the last five years. That is an indication that the advocacy of American officials has been effective,” Earnest said.