A group of prominent U.S. economists, including former Federal Reserve chiefs, Alan Greenspan and Ben Bernanke, wrote to congressional leaders Thursday to support key trade legislation but warn against including currency rules in trade deals.
The economists, all former chairs of the President's Council of Economic Advisers, said legislation to streamline the passage of trade deals through Congress "encourages our trade partners to put their best offers on the table."
But in the letter, they said rules aimed at preventing trading partners from deliberately weakening their currencies, which many lawmakers are pushing for, should be avoided.
"This is because monetary policy affects the value of currencies," said the letter, signed by 14 economists including Charles Schultze, Martin Feldstein, and Alan Krueger.
"Attempts to penalize countries for supposedly manipulating exchange rates would thus impose constraints on U.S. monetary policy, to the detriment of all Americans."
Republicans and Democrats are working on a bipartisan bill that would allow Congress to set negotiating objectives for trade deals in exchange for a yes-or-no vote, although Senate Committee on Finance Chairman Orrin Hatch said earlier this week negotiations were "stuck."
Some lawmakers are pushing for that bill to have tougher provisions on currency manipulation, but Hatch, a supporter of rules against currency cheating, said it was not the right forum.
Other avenues include a standalone bill which would count currency manipulation as an illegal export subsidy and insist on currency rules in a Pacific trade pact, which is near completion.
Institute of International Finance chief economist Charles Collyns said introducing currency into the Trans-Pacific Partnership (TPP) talks could hurt the U.S. negotiating position.
"They are going to be resisted by all the other negotiating partners and would undercut our capacity to obtain other important concessions," he said on a call for journalists.
TPP partners Japan, Australia and Mexico have spoken out against adding currency rules to the deal.
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