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Manufacture This

The blog of the Alliance for American Manufacturing

Currency manipulators beware: The White House wants more 'market-determined' exchange rates.

The ol’ global economy is on the fritz again, and it looks like the policymakers who are charged with keeping markets open and trade flowing are running out of duct tape with which to fix it. What’s a central banker to do? Reports the Wall Street Journal on a weekend meeting of the International Monetary Fund (IMF):

The bleak outlook is reviving divisions among policy makers on how to use what limited policy tools they have at their disposal. Some governments such as France’s want looser budgets—or more deficit spending—to invest in their economies and boost demand. Others say structural overhauls to open up economies and labor markets should be the top priority.

Meanwhile, debate is brewing over how much the ECB should step in with further stimulus measures. The central bank could buy government bonds directly—as central banks in the U.S., U.K. and Japan have done—but faces resistance from some countries, particularly inflation-averse Germany.

Into the IMF fray waded Treasury Secretary Jack Lew, who warned — ahead of his department’s impending report on foreign exchange rates — that his counterparts should “avoid persistent exchange-rate misalignments, refrain from competitive devaluation, and not target exchange rates for competitive purposes.”

He’s talking about currency manipulation. The tendency of some of America’s largest trading partners to game exchange rates in order to boost their domestic economies and boost exports comes at the expense of America’s own economy, American exports, and American jobs. And Lew actually singled out the Chinese government about its tendency to fool with the strength of the yuan:

It is critical that Chinese leaders implement reforms that move the country toward a market-determined exchange rate and address financial-sector risks. —Treasury Secretary Jack Lew

That, right there, is what amounts to tough talk from the Obama administration toward China on an issue that has dogged U.S. manufacturing for years.

If it strikes you as kind of milquetoast then I’ve got some bad news: We’ll probably see similar language in the Treasury exchange rate report due out this week. The report comes out twice a year, and though it’s a real opportunity for the White House to take action against currency manipulators — it’s the first step to putting consequences in place to combat artificial currency levels — this administration has passed on every one of its 11 previous chances.

Will No. 12 be any different?