November 15, 2015
The Planet Money team had a nice segment pointing on the Trans-Pacific Partnership (TPP). The piece pointed out that the TPP has no enforceable language on currency management.
While the deal is ostensibly about eliminating tariffs and other trade barriers, controlling currency values can be an effective way to impose barriers to trade. If a country intervenes in currency markets to lower the value of its currency by 10 percent it has an impact that is comparable to imposing a 10 percent tariff on all imports and giving out a 10 percent subsidy on all exports. There is nothing in the TPP that will prevent the parties in the agreement from protecting their industry through this mechanism.
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