For Immediate Release:
February 12, 2015
Contact: Adam Temple
(202) 400 - 2610
Dr. Arthur Laffer Joins AAPC’s Governor Matt Blunt on Capitol Hill to Call on Congress to Address Currency Manipulation
Washington, D.C. – American Automotive Policy Council President Governor Matt Blunt and free-market economist Dr. Arthur Laffer joined forces today on Capitol Hill to highlight the one-sided competitive advantage trading partners gain through currency manipulation.
Governor Blunt and Dr. Laffer conducted a media roundtable and a series of meetings with elected officials discussing Dr. Laffer’s recent analysis that demonstrates the strong U.S. growth that would result from identifying currency manipulators and eliminating this unfair trade practice.
“Even the most promising trade pacts can be undermined by other countries’ use of currency manipulation to gain an unfair trade advantage,” Blunt said. “We agree with bipartisan majorities in both the House and Senate that have urged the Obama Administration to include strong and enforceable currency provisions in future trade agreements.”
There is a growing body of evidence that currency manipulation by foreign countries hurts U.S. competitiveness and American jobs.
“The negative impacts of currency manipulation are well documented,” Dr. Laffer said. “Identifying currency manipulators and eliminating this unfair trade practice would result in strong U.S. growth. A simple three-part test would do wonders on that front and by including this test in future trade agreements, global leaders can adopt trade norms that lead to an even playing field for all member nations.”
Dr. Laffer’s recent study, “Currency Manipulation and its Distortion of Free Trade,” can be found here. Key findings include:
- “Persistent currency undervaluation has benefitted the currency manipulators at the expense of countries allowing the flexible adjustment of exchange rates.”
- “The impact of currency manipulation has potentially dampened the U.S. current account by about 4 percent of GDP."
- “It is likely that millions of jobs in the U.S. were lost as a result of current account imbalances that were generated, in part, by currency manipulation.”
- “Unemployment rates in economies with undervalued currencies have stayed relatively low, while labor participation rates have risen in these countries compared to the U.S.”
- “Since 1991, Japan has conducted official intervention in the foreign exchange market 376 times. Historically, heavy official Japanese intervention has prevailed since the 1970s in order to protect the competitiveness of its exports by curbing substantial yen appreciation.”
- “The total size of Japan’s 2011 intervention was an astonishing 3 percent of nominal GDP.”
- “Given the excess of foreign reserves, presence of a current account surplus, historical precedent, and significant policy changes over the past month, Japan appears to be falling back into its past practice of foisting much of the burden of its flawed policies onto its trade partners.”
The study by Dr. Laffer supports AAPC's three-part test as an effective way to address currency manipulation in future free trade agreements. The test asks three key questions that, if all are answered in the affirmative, identify that country as a currency manipulator:
- Did the nation have a current account surplus over the six-month period in question?
- Did it add to its foreign exchange reserves over that same six-month period?
- Are its foreign exchange reserves more than sufficient (i.e., greater than three months normal imports)?
The American Automotive Policy Council (AAPC) represents the common public policy interests of its member companies – FCA US, Ford Motor Company, and General Motors Company.