Sir, Your editorial “ Congress threatens trade deals with currency row” (February 11) is thoroughly confused. You stress the importance of Barack Obama’s holding firm on both the Trade Promotion Authority and the Trans Pacific Partnership. I totally agree. But the bills submitted in both Houses of Congress on February 10 to authorise countervailing duties against exports subsidised by competitively undervalued currencies, to which you object, would not directly affect either the trade negotiations or the legislation ultimately needed to implement them. By adding at least a modest policy tool to deal with currency manipulation, the new bills would in fact respond to legitimate Congressional concerns and help mobilise the votes needed to pass TPA and TPP.
Your substantive objection to the proposed legislation is that it is “unworkable because one person’s devaluation is another’s monetary policy”. But there is a very clear distinction between direct intervention in the foreign exchange markets to competitively undervalue a currency, the very definition of manipulation, and the secondary or derivative impact of QE or any other monetary policy that is conducted primarily for domestic purposes using domestic policy instruments. Contrary to your assertion, the US strongly supports the new QE policy of the European Central Bank. Trade and currency are linked inextricably and the new Congressional initiatives would deal with them in a totally responsible manner.
C Fred Bergsten
Senior Fellow and Director Emeritus,
Peterson Institute for International Economics,
Washington, DC, US
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