The 12 countries of the ambitious Trans-Pacific Partnership free-trade deal announced a parallel agreement Thursday to avoid currency manipulation, a particular worry of the United States. In a joint declaration accompanying the release of the full text of the TPP, the 12 pledged to permit their currencies to move based on economic fundamentals, and to not manipulate them to gain advantage over others.
The pact says that all 12 confirmed their commitment to International Monetary Fund rules "to avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage." Each of the 12 will also "refrain from competitive devaluation and will not target its country's exchange rate for competitive purposes." "Allowing real exchange rates to adjust in line with economic fundamentals facilitates smooth macroeconomic adjustment, helps to avoid prolonged external imbalances, and promotes strong, sustainable, and balanced global growth," they said.
The agreement on foreign exchange, an adjunct to the TPP pact completed after marathon negotiations last month, was pushed by Washington, where many legislators had said they would not ratify a trade deal that did not have currency provisions. While the United States has not accused any of the TPP members of currency manipulation, it has criticized South Korea, which wants to join the trade group, of keeping its currency artificially low. In addition, Washington has repeatedly criticized China for holding its currency low for a trade advantage. If China wants to join the TPP, it would have to accept the currency rules as well.
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