Treasury Secretary Jack Lew told CNBC that new rules designed to block mergers for the purposes of lowering a company's tax burden were not enforced retroactively.
The rules, issued last week, torpedoed a $160 billion deal between U.S. pharmaceutical giant Pfizer and Irish drugmaker Allergan. The merger would have allowed Pfizer to take advantage of Ireland's more favorable tax environment in a so-called inversion deal.
Allergan CEO Brent Saunders told CNBC last week he believed the government had targeted the deal specifically, and that the Treasury Department had changed the rules "after the game has started."
"Let's be clear. It was not retroactive," Lew said in the CNBC interview, which aired Thursday. The interview was conducted Wednesday.
"Everyone who engages in business knows that it's subject to changes in law or in ruling," he said. "And I think the important thing here is that every one of them has been on notice for a very long time. It hasn't been a secret that this is an area of deep concern."
Saunders singled out the provision in the rules that imposes a three-year limit on foreign companies bulking up on U.S. assets to avoid ownership requirements for a later inversion deal. He said that ban in particular was designed to block the Pfizer-Allergan deal.
Former U.S. Treasury Secretary Henry Paulson also took issue with the action, telling CNBC last week he was "troubled and disappointed by the effort."
Lew said it took a while for Treasury to identify the pattern of serial inversion, in which companies plan over multiple years to build up a big enough foreign presence to pave the way for a large deal.
"What I'm really focused on is shutting that pipeline down. So this is not available as a matter of policy going forward," he said.
Treasury has now issued three rules on inversions. Asked whether corporations should expect more, Lew said his department "will continue to look at what tools we have."
Lew also addressed the Trans-Pacific Trade Partnership, a trade deal among a dozen Pacific Rim nations that has been criticized by GOP presidential candidate Donald Trump and Democratic contenders Hillary Clinton and Sen. Bernie Sanders.
By bringing foreign labor and environmental practices in line with U.S. standards, the TPP makes American products more competitive, he said.
"I don't think we should say that we want other people to make the rules of the road of who can do business there and what the terms of doing business there are," he said.
He said the United States must stay engaged internationally so that it preserves its leadership role and power to influence the world, for example, through financial sanctions on foreign countries.
Amid the current global economic uncertainty, the United States is viewed as an island of strength, he said.
Lew said it was important for nations around the world to avail themselves of a broader range of monetary and fiscal policy tools to correct their economies. He stressed that G-20 nations had agreed at a recent meeting in Shanghai to refrain from competitive currency devaluation and to communicate to avoid surprises on that front.
"Competitively, devaluation is at best a zero-sum game," he said. "In reality, because it's such a destructive process, you'd probably have a shrinking pie. So you're actually competing for less. That's not a good place for the world to go."