Senate ducks punishment for countries that manipulate currency, keeps trade deal on track

The trade agreement survived another hurdle in the Senate on Friday evening when a pro-free trade coalition of Democrats and Republicans rejected provisions requiring the government to investigate and punish other countries’ currency manipulation.

President Obama had said if the provision had been approved, he would have been forced to veto the fast-track trade bill he’s desperately seeking from Congress, since it would scuttle chances for a grant Pacific free trade pact.

But in a 51-48 vote senators bowed to his wishes, defeating an effort to add in the manipulation language and preserving the core of the fast-track trade deal, which is now on a glide path to passage in the Senate.

The vote represented a victory for Mr. Obama and for GOP leaders, who have formed an unlikely pro-trade alliance, going up against labor unions and other liberal pressure groups who have said the deal will hurt American workers.

On currency, Sen. Rob Portman, Ohio Republican, and Sen. Debbie Stabenow, Michigan Democrat, argued that countries such as China artificially keep their currencies low, which gives their exporters an advantage.

“Currency manipulation has already cost U.S. workers as many as five million jobs,” Ms. Stabenow said. “Cracking down on countries that are breaking the rules is the only way we can make sure our workers and businesses have a fair shot to win in a global marketplace.”

But free traders said inserting the currency issue into trade negotiations would poison the talks.

“And this amendment would lead to a currency war, undermine our independence in monetary policy, and threaten our standing as the world’s reserve currency. It would also kill any potential trade agreements because no nation would agree to these conditions,” said Rep. Paul Ryan, Wisconsin Republican and chairman of the House Ways and Means Committee, who will have to shepherd a bill through his chamber once the Senate acts.

Mr. Obama’s aides had said he would have to veto the fast-track trade bill if the currency provisions were included.