MNI POLICY: US-China Currency Provisions Modeled on USMCA Pact

By Evan Ryser

     WASHINGTON (MNI) - The "phase one" trade deal between U.S. and China

announced Friday will see currency provisions largely modeled after chapters of

the Trump Administration's new deal with Canada and Mexico also reached this

week, administration officials said Friday. 

     "We have important commitments on currency in the area of increasing

transparency as well as substantive commitments on policy issues relating to

competitive evaluations as well, which all of this is enforceable," a senior

administration official told reporters Friday. 

     "It requires commitments to refrain from competitive devaluations and

targeting of exchange rates and also would significantly increase transparency

and provide mechanisms for accountability and enforcement," the official said.

The commitments should "really help reinforce macroeconomic exchange rate

stability and ensure that China cannot use its currency practices to unfairly

compete against U.S. exports." 

     The first-stage China deal will be signed the first week of January,

according to the official, and the document will be made public "soon," after it

is scrubbed by lawyers for national security reasons. President Trump's economic

advisor, Larry Kudlow, said Friday he expects the 86-page document China

agreement to be signed at the ministerial level between U.S. Ambassador Robert

Lighthizer and Chinese Vice Premier Liu He. 

     The agreement includes "substantial and specific commitments" by China on

critically important issues including intellectual property, technology

transfer, agricultural structural issues, financial services, and currency and

foreign exchange, according to the administration official.

     "There's a very strong, effective, enforcement mechanism, and there are

also commitments relating to purchases over the next two years" on average $40

billion to $50 billion, with expectations for that to continue going forward,

the official said, adding that "We are very comfortable that our farmers,

ranchers and growers can meet those numbers."

     The Office of the U.S. Trade Representative submitted a Federal Register

notice Friday afternoon officially suspending "until further notice" the tariffs

that had been set to go into effect at Dec. 15 effective 12:01 a.m. eastern

standard time.

     It separately submitted legislative text and accompanying material on the

new U.S.-Mexico-Canada Agreement to Congress on Friday, moving the trade pact

closer to the finishing line. The House Ways and Means Committee will take up

that trade agreement beginning Tuesday.

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

[TOPICS: M$U$$$,MT$$$$,MGU$$$]