By Vicki Needham - 07/03/14 03:27 PM EDT
More than a dozen leading manufacturing groups on Thursday called on the Obama administration to include currency manipulation provisions in all future trade agreements, especially the Trans-Pacific Partnership (TPP).
The 13 groups, including the American Automotive Policy Council (AAPC), sent a letter to Treasury Secretary Jack Lew and U.S. Trade Representative Michael Froman, as TPP talks begin in Ottawa.
“Several recent economic studies have estimated that undervalued currencies resulting from intervention have caused an increase in the U.S. trade deficit of up to $500 billion per year, which suppresses U.S. employment levels by 5 million jobs.”
In the joint letter, AAPC and its partners emphasized how unfair currency policies hurt U.S. workers, exports and economic growth.
"Manipulation of currency levels by one trading partner to gain an unfair competitive advantage over another is one of the biggest distortions of international trade in the 21st century," they wrote.
The groups argue that currency exchange rates should be market-driven, but some U.S. trading partners intervene in the value of their currencies.
"This has inflicted enormous economic damage on the United States and undermines public support for new trade agreements and their potential economic benefits," they wrote.
They suggested that, ideally, these issues could be addressed through the International Monetary Fund (IMF) and World Trade Organization (WTO) but that neither organization "is up to the challenge."
They argue that while the IMF prohibits the manipulation of exchange rates, it has no clear test to determine whether a nation has interfered with its currency and it lacks an enforcement mechanism.
The WTO also prohibits currency manipulation but points to the IMF rules for guidance.
“This letter has made it clear that strong and enforceable currency manipulation disciplines are a top priority for American manufacturers and job creators,” said former Gov. Matt Blunt, president of AAPC.
“The American auto industry is the leading U.S. export industry. To be a strong, equitable trade partner, you need to play by the rules."
All 13 groups support a specific three-part test to determine whether a country is manipulating its currency, which include a question as to whether a country added foreign exchange reserves over that a six-month period when it also had an account surplus.