Senate Currency Manipulation Bill Introduced (Would Affect China )
On March 16, 2010, a bipartisan group of Senators introduced legislation to address currency misalignments that affect U.S. trade. The goal of the legislation is to penalize countries, such as China, that undervalue their currency to artificially discount their foreign products, which provides a trade advantage over U.S. products. The legislation is a combination of bills introduced in two previous congresses.
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Legislation Would Require Treasury Biannual Report and Action
The legislation, entitled the "Currency Exchange Rate Oversight Reform Act,"1 would require the Treasury Department to, using international guidelines, issue a biannual report stating if a country is misaligning its currency and needs priority action.
Two categories of currencies would be identified. The bill would require the report to identify two categories of currencies: a general category of "fundamentally misaligned currencies" based on objective criteria and a select category of "fundamentally misaligned currencies for priority action" that would reflect misaligned currencies caused by policy actions by a foreign government.
Engagement, punitive measures required. If currency misalignment is found, Treasury would then be required to immediately engage the foreign government to solve the problem. If the misalignment is not solved within 90 days, the bill would require punitive measures against the country, such as preventing the U.S. government from purchasing goods and services from that country and forbidding OPIC financing or insurance projects in the country.
If the misalignment persists longer than one year, the bill would require the U.S. Trade Representative to bring a case against the country to the World Trade Organization and would require Treasury to consult with the Federal Reserve Board and other central banks to consider remedial intervention in currency markets.
ITA Would Investigate Currency Manipulation as a CV Subsidy
The bill also would require the International Trade Administration to investigate a company's claim that foreign products are receiving subsidies in the form of currency manipulation as a "countervailable subsidy" and would provide formulas to be used by DOC to impose penalties for dumping or subsidies so manufacturers and businesses would not have to wait for the Department of Treasury to Act.
Presidential Waiver Authority Would Be Limited
The bill would also allow the President to initially waive the punitive consequences that would be required after 90 days if they would harm the national security or economic interest of the U.S., but the waiver would have to be explained to Congress in writing and would be required to explain how the adverse impact of taking action against the country would be greater than the potential benefits.
Any subsequent waiver would require the President to explain how the adverse impact of taking action would be substantially out of proportion to the benefits of such action.
Waiver could be disapproved by Congress. The bill would allow any Member of Congress to introduce a joint resolution of disapproval concerning the President's waiver.
New Treasury Consultative Body Would be Established
The bill would create a new body with which Treasury must consult during the development of its report. Of the nine members, one would be selected by the President and the remainder would be chosen by the Chairmen and Ranking Members of the Senate Finance and Banking Committees and the House Ways and Means and Financial Services Committees. The members would be required to have demonstrated expertise in finance, economics, or currency exchange.
1The bill, which has not yet been assigned a number, was introduced by Senators Schumer, Graham, Brownback, Brown, Snowe, Bayh, Cardin, Casey, Feingold, Gillibrand, Levin, Webb, Specter, Lincoln, and Collins.
(See ITT's Online Archives or 03/16/10 news, 10031625, for BP summary of House Ways and Means hearing on China currency issue.
See ITT's Online Archives or 03/10/10 news, 10030315, for BP summary of IMF statement on undervaluation of Chinese Currency.
See ITT's Online Archives or 03/01/10 news, 10030120, for BP summary of 15 Senators calling for inclusion of currency manipulation in CV investigation of China Paper.)
Press Releases on Currency Exchange Rate Oversight Reform Act of 2010 (dated 03/16/10) available at http://schumer.senate.gov/new_website/record.cfm?id=323135 and http://www.stabenow.senate.gov/press/2010/031610currency.htm.