White House Threatens to Veto Trade Bill Over Currency Measure

By William Mauldin 

The White House Tuesday threatened to veto a crucial trade bill if it contains legislation with binding punishments for currency manipulation, the main point of contention between President Barack Obama and congressional critics of his trade policy.

Treasury Secretary Jacob Lew called the bipartisan currency measure a "poison pill" that could sink trade legislation Mr. Obama needs to help complete and win passage of a proposed 12-nation Trans-Pacific Partnership trade pact.

"If a trade agreement is required to come back with a currency discipline that is enforceable through trade mechanisms, I don't think there is another country in the world that would agree to that," Mr. Lew said at a Bretton Woods Committee conference in Washington. "It's a poison pill in terms of getting agreement on TPP."

Backed by Ford Motor Co. and other lawmakers, Sen. Rob Portman (R., Ohio) and Sen. Debbie Stabenow (D., Mich.) have proposed an amendment to so-called fast-track trade legislation that would press the administration's negotiators to include enforceable currency rules in the Pacific pact.

Mr. Portman rejected the "poison pill" accusation Tuesday, saying the amendment was "a vitamin" instead.

Granting the president fast-track authority would allow him to complete negotiations on the Pacific pact and then present it to Congress for an up-or-down vote, without amendments.

But the White House and Mr. Lew warned Mr. Obama could veto the entire fast-track bill if Mr. Portman's language is included. The bill, also known as trade promotion authority, could go to a full vote of the Senate this week.

"The president would certainly not support that kind of a provision and would even take the extraordinary step of vetoing the TPA bill if this amendment were added," White House spokesman Josh Earnest said, adding that the amendment would "interfere with the ability of the Federal Reserve to implement monetary policy."

The majority of Republican lawmakers who back Mr. Obama on the trade legislation and the Pacific trade deal also don't want to see it soured by the currency rules.

"Most of my members are opposed to it," Senate Majority Leader Mitch McConnell told reporters at the Capitol. "We'll be working hard to keep any amendments off the bill that would defeat the bill."

With tariffs already low, many lawmakers, including most Democrats, have expressed interest in rules that would punish countries that take unacceptable steps to cheapen their currencies to gain a trade advantage, which could amount to a bigger boost than what companies achieve through lower tariffs in agreements. But defining currency manipulation is tricky, not to mention identifying the intent of monetary policy makers responding to a variety of factors besides trade.

In the longer term, officials warn such rules, even if narrowly tailored, could open a can of worms that puts U.S. monetary policy, including the Fed's quantitative easing, under international scrutiny.

Besides the Portman-Stabenow amendment, the administration has criticized another measure backed by Sen. Chuck Schumer (D., N.Y.) that would allow U.S. industry to petition for punitive tariffs to be imposed on rivals that have benefited from alleged currency manipulation. That measure is part of a separate customs enforcement bill with many provisions that Mr. Obama, the GOP and Democratic leaders support.

Mr. Obama last week signaled he is open to some new efforts to crack down on currency shenanigans abroad, and on Tuesday the White House reiterated that it backs "constructive tools to address unfair currency practices." Mr. Lew supports an amendment on currency backed by Sen. Michael Bennet (D., Colo.).

Ian Talley contributed to this article.

Write to William Mauldin at [e-mail]

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