Trade and exchange rates are closely linked. But does that mean that international trade agreements should include provisions governing national policies that affect currency values? Simon Johnson, recently argued that mega-regional agreements like the Trans-Pacific Partnership should be used to discourage countries from intervening in the currency market to prevent exchange-rate appreciation. United States Treasury and the Office of the US Trade Representative continue to argue that macroeconomic issues should be kept separate from trade negotiations. [[World Trade Organization and the International Monetary Fund – are not organized to respond effectively to possible currency manipulation on their own]] Incorporating macroeconomic policies affecting exchange rates into trade negotiations would require either that the WTO acquire the technical capacity (and mandate) to analyze and adjudicate relevant national policies or that the IMF join the dispute-settlement mechanisms that accompany trade treaties. [[Treasuries and central banks can drive down their exchange rates to gain a competitive trade advantage]] The most direct method is purchases of foreign assets. But, in a world of short-term capital flows, central-banks' policy interest rates (even just announcement) also have a major impact. Moreover, quantitative easing affects exchange rates and trade, even if central banks purchase only domestic assets, as demonstrated by recent movements in the exchange rates of the dollar, the euro, and the yen. [[Macroeconomic policies that affect exchange rates are problematic, but trade negotiations are not the right forum to discuss the causes and consequences of current-account imbalances and reaching agreements on macroeconomic-policy coordination; that is what the IMF and the G-20 are for]] G-20 works in "mutual assessment process" to analyze national economic policies' effects on other countries and global growth, with the goal of formulating individual adjustment commitments - has highlighted the difficulty of reaching agreement on macroeconomic policies with significant spillover effects. Indeed, it is even more difficult than reaching trade agreements, which must cover issues like tariffs, quotas, quality standards, regulatory regimes for particular sectors, and relevant microeconomic issues. Merging all of these challenging topics into a single negotiation process is a recipe for deadlock. ## References