In the next few days negotiators hope to wrap up the hidden agreements in the Trans-Pacific Partnership (TPP), a massive trade bill that includes the United States and 11 other Pacific Rim nations. Unfortunately, it appears that we have not learned from past mistakes, and this trade deal again lacks enforceable language against currency manipulation.
Currency manipulation has become our trade competitors' favorite maneuver for skirting massive trade deals as soon as they sign them, and it's about to happen again.
Before these trade deals become effective, some of our trading partners devalue their currency, immediately reducing the cost of their goods to us and everyone else, and increasing the cost of our goods to them.
Politicians on both sides of the aisle endorse trade agreements because of claims they will reduce or remove tariffs and export subsidies, yet these large regional pacts, like the TPP, are also about setting fair rules for trade. Most of the TPP pertains to non-tariff barriers and includes chapters on the environment, labor rights, and intellectual property. Currency manipulation should be included as its own chapter since it is one of the most fundamental non-tariff barriers to trade. Unfortunately for the TPP, that is not the case.
The result of currency manipulation, as it occurs after trade agreements, is that it's nearly impossible for the U.S. to get a fair shake in these deals. In fact, if you look at the data from trade deals we've already entered, the strongest correlation you can make is that the more trade deals we sign, the more jobs we lose and the higher our trade deficit grows.
Our current trade deficit sits at $505 billion. This deficit has not only spurred the loss of good paying American jobs, but it has also greatly weighed down our domestic economy by 2.5 to 5.5 percent every year for the last decade. If that drain didn't happen, we could have economic growth in this nation we haven't witnessed for decades.
This notion of currency manipulation is not speculation. In August, Vietnam -- one of the participating countries in TPP -- devalued its currency in response to a major devaluation by China earlier this summer. Malaysia and Singapore have also intervened in their currency by increasing reserves by an unprecedented amount. There's nothing stopping others in the agreement from manipulating their currencies as well.
A recent report by the International Monetary Fund demonstrated the power of devaluation of a currency -- a 10 percent fall in the value of a nation's currency can increase exports by an average of 1.5 percent of GDP. At that point, the playing field is no longer level, and trade is not free or fair.
Currency manipulation is an enormously unfair trade measure that continues to be used to outmaneuver the U.S. government. The TPP agreement must include a chapter on currency manipulation that establishes enforceable rules and procedures to address currency manipulation. If it does not, TPP will not be worth the paper it is written on.
Roger Johnson is president of National Farmers Union.