Taking On Currency Manipulation: Worse Late Than Never

The old saying "Better late than never" is sometimes totally inappropriate -- as in the recent determination of Congress to condition approval of the Trans-Pacific Partnership on action to deter currency manipulation by our trading partners.

Perhaps nothing in all my years at the helm of the National Association of Manufacturers was as frustrating as currency manipulation. Many of our member companies contended with justification that the Chinese were manipulating the value of their currency, amassing vast sums of U.S. currency and financial instruments, to gain an unfair trade advantage. It enabled the Chinese to sell products here at less cost than our companies paid for raw materials. We lost 5.7 million manufacturing jobs in the first decade of this century, and a major part of that loss -- 5 million, according to the Peterson Institute -- was directly attributable to currency manipulation.

But other NAM members, mainly larger companies, were making products in China and selling them here at a huge profit. They were adamantly opposed to the NAM's position against currency manipulation and were not the least bit shy about telling me about it. I caught it from both sides for several years.

Now seemingly out of the blue 230 members of the House have vowed to vote against the new trade agreement if restraint of currency manipulation is not on the table -- a condition likely to torpedo the entire agreement, which would be a great advantage to us. Many senators are similarly inclined.

I believe this amounts to shutting the barn door after the horses have fled. Whatever advantage China and others gained from currency manipulation is now spent. We are no longer hemorrhaging manufacturing jobs; we are adding them. Foreign currencies are losing value against the dollar, not because of currency manipulation but because we are the world's reserve currency, and we have the world's strongest economy.

It is also abundantly clear that we are not exactly blameless in this matter. The Federal Reserve's quantitative easing policy had the effect of weakening the dollar for several years. And there remains a split in the business community between those adversely affected by currency manipulation and those gaining advantage from it. Some larger companies routinely use currency as a hedge and make no bones about it. We can manipulate financial markets as well or better than any of our competitors. It bears mentioning also that the soaring dollar is a key factor in the collapse of oil prices, which are denominated in dollars. The oil -- and gas at the pump -- cost less because the dollar is worth more.

But the critical reason that Congress should take a pass on this much-too-late effort to address currency manipulation is that it would likely abort our chance for a really beneficial free-trade agreement with Pacific Rim nations, which would bring us must better access to many growing markets. If there were a good time to do this, it was many years ago. Today it would amount to a cure worse than the disease.

Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years, and later of The Manufacturing Institute. Jerry is available for speaking engagements.