Better late than never, I guess.
Larry Summers wrote a recent policy recommendation report, in collaboration with the Center for American Progress, which said (see page numbered 123 at this link):
The World Trade Organization, or WTO, rules pertaining to exchange rates are inadequate to address the challenge of unfair advantage from skewed exchange rates. Thus, it is unsurprising that no WTO member country has ever brought a currency dispute to the body. New trade agreements should explicitly include enforceable disciplines against currency manipulation that appropriately tie mutual trade preferences to mutual recognition that exchange rates should not be allowed to subsidize one party’s exports at the expense of others.
Larry Summers has been part of so many problems. The financialization of the economy, the push towards a fictional services economy future nirvana, opposing policies that are good for producing things and main street businesses, etc. He was a former Treasury Secretary and could have done something about currency. So now he says we gotta do this.
On the upside, he finally is on record saying we need to fix currency in order for trade to work right. He is correct that the WTO prohibits countries to use exchange rates to frustrate the intent of the WTO, i.e. replace tariff cuts with devalued currency. The monetary/central banker community does not want trade issues in their sandbox. This is a very real and difficult-to-overcome turf issue.
Trade deals freeze tariffs and some special interest non-tariff barriers. But do not freeze or otherwise impact tariff barrier replacement tactics like currency manipulation, raising consumption taxes charged at the border, subsidies through state owned enterprises, etc. That’s why America has been the victim of unilateral trade disarmament even as our trade officials pursue more stupid, mercantilist enabling deals.
So, when a former Treasury secretary says that currency values are integral to trade deals and should be a part of them, it is a good step.
