[CTC] The assault on Rob Portman in Ohio

Wed Mar 24 10:46:57 PDT 2010

The Currency Exchange Rate Oversight Reform Act of 2010

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Text of Legislation <http://thomas.loc.gov/cgi-bin/query/z?c111:S.3134:>  

Summary

Titles
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Cosponsors
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Committees
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All
<http://thomas.loc.gov/cgi-bin/bdquery/D?d111:1:./temp/~bdzRev:@@@X|/bss/111
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Introduced on March 16, 2010, by Senators Schumer, Stabenow, Graham,
Brownback, Brown (OH), Snowe, Feingold, Specter, Casey, Bayh, Levin, Cardin,
Gillibrand and Webb

The Schumer-Stabenow-Graham Currency Exchange Rate Oversight Act of 2010
will reform and enhance oversight of currency exchange rates.  The bill
provides consequences for countries that fail to adopt appropriate policies
to eliminate currency misalignment and includes tools to address the impact
of currency misalignment on U.S. industries.  

Under current law, Treasury is required to identify countries that
manipulate their currency for purposes of gaining an unfair competitive
trade advantage.  In recent years, Treasury has found that certain
countries' currencies were undervalued.  However, based on its
interpretation of the law's legal standard for a finding of "manipulation,"
Treasury has refused to cite such countries as currency manipulators.  The
Schumer-Stabenow bill repeals the currency provisions in current law and
replaces them with a new framework, based on objective criteria, which will
require Treasury to identify misaligned currencies and require action by the
administration if countries fail to correct the misalignment.

Establishes New Objective Criteria.  The legislation requires Treasury to
develop a biannual report to Congress that identifies two categories of
currencies: (1) a general category of "fundamentally misaligned currencies"
based on observed objective criteria and (2) a select category of
"fundamentally misaligned currencies for priority action" that reflects
misaligned currencies caused by clear policy actions by the relevant
government. 

Strengthens Existing Countervailing Duty Law to Address Currency
Undervaluation.  The legislation clarifies that the Commerce Department
already has authority under U.S. law to investigate whether currency
undervaluation by a government provides a "countervailable subsidy" and must
do so if a U.S. industry requests investigation.  In recent years, the
Commerce Department has been reluctant to exercise its authority under the
law.  This legislation, therefore, seeks to strengthen and reaffirm existing
law and the Commerce Department's obligations under the law.

The legislation also makes it clear that the Commerce Department is required
to investigate currency undervaluation as a "countervailable subsidy" if
Treasury designates a "priority" currency and a U.S. industry requests an
investigation.  Under existing trade laws, if Commerce and the International
Trade Commission find that subsidized imports are causing economic harm to a
U.S. industry, the administration must impose duties on those imports to
counter the effect of the subsidy.

Requires New Consultations.  The legislation requires Treasury to engage in
immediate consultations with all countries cited in the report.  For
"priority" currencies, Treasury would seek advice from the International
Monetary Fund (IMF) as well as key trading partners.  

Triggers Tough Consequences.  For "priority" currencies, important
consequences are triggered unless a country adopts policies to eliminate the
misalignment.

Immediately upon designation of a "priority" currency, the administration
must:  

.        Oppose any IMF governance changes that benefit a country whose
currency is designated for priority action. 

.        Determine whether to grant a country "market economy" status for
purpose of U.S. antidumping law.

After 90 days of failure to adopt appropriate policies, the administration
must:

.        Reflect currency undervaluation in dumping calculations for
products produced or manufactured in the designated country.

.        Forbid federal procurement of goods and services from the
designated country unless that country is a member of the WTO Government
Procurement Agreement ("GPA").  

.        Request the IMF to engage the designated country in special
consultations over its misaligned currency. 

.        Forbid Overseas Private Investment Corporation (OPIC) financing or
insurance for projects in the designated country.  

.        Oppose new multilateral bank financing for projects in the
designated country. 

After 360 days of failure to adopt appropriate policies, the administration
must:

.        Require the U.S. Trade Representative to request dispute settlement
consultations in the World Trade Organization with the government
responsible for the currency.  

.        Require the Department of Treasury to consult with the Federal
Reserve Board and other central banks to consider remedial intervention in
currency markets.  

Limits Presidential Waiver.  The President could initially waive the
consequences that take effect after the first 90 days if such action would
harm national security or the vital economic interest of the United States.
However, the President must explain to the Congress in writing how the
adverse impact of taking an action would be greater than the potential
benefits of such action.  Any subsequent economic waiver would require the
President to explain how the adverse impact of taking an action would be
substantially out of proportion to the benefits of such action.
Furthermore, any Member of Congress may thereafter introduce a joint
resolution of disapproval concerning the President's waiver.  Should the
disapproval resolution be approved, the President may veto it, and the
Congress would have the opportunity to override the veto.

Establishes New Consultative Body.  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 by
the Chairmen and Ranking Members of the Senate Finance and Banking
Committees, as well and the House Ways and Means and Financial Services
Committees.  The members must have demonstrated expertise in finance,
economics, or currency exchange. 

China's Currency Manipulation Undermines U.S. Manufacturing Base By Making
U.S.-Made Goods More Expensive Relative To Foreign Goods

Legislation Merges Two Measures Advanced Separately In Previous Congresses

WASHINGTON, DC - Responding to the failure of both Republican and Democratic
administrations to confront China's currency manipulation, a bipartisan
group of 14 U.S. senators announced new legislation Tuesday to vigorously
address currency misalignments that unfairly and negatively impact U.S.
trade. If passed, the legislation would provide less flexibility to the
Treasury Department when it comes to citing countries for currency
manipulation. It would also impose stiff new penalties on designated
countries, including tariffs on the countries' exports and a ban on any
companies from those countries receiving U.S. government contracts.

The legislation was introduced by U.S. Senators Charles E. Schumer (D-NY),
Lindsey Graham (R-SC), Debbie Stabenow (D-MI), Sam Brownback (R-KS), Sherrod
Brown (D-OH), Olympia Snowe (R-ME), Evan Bayh (D-IN), Ben Cardin (D-MD),
Robert Casey (D-PA), Russ Feingold (D-WI), Kirsten Gillibrand (D-NY), Carl
Levin (D-MI), Jim Webb (D-VA), and Arlen Specter (D-PA). The bill comes two
days after the Chinese Premier sternly rejected calls for China to float its
currency, even though experts estimate it is undervalued by 25 to 40 percent
compared to the dollar.

Senator Schumer said: "We are sending a message to the Chinese government:
if you refuse to play by the same rules as everyone else, we will force you
to. China's currency manipulation would be unacceptable even in good
economic times. At a time of 10 percent unemployment, we simply will not
stand for it. There is no bigger step we can take to promote U.S. job
creation, particularly in the manufacturing sector, than to confront China's
currency manipulation. This is not about China bashing; it's about defending
the United States."

Senator Stabenow said: "Our workers are losing their jobs because countries
like China continue to place artificial discounts of up to 40% on their
products and then sell them here in America. This unfair practice puts our
manufacturers and businesses at an extreme disadvantage and hurts our
economy. That's why I have joined with my Democratic and Republican
colleagues to introduce this bill to require the Departments of Treasury and
Commerce to take action and stop these countries from cheating."  

Senator Brown said: "U.S. manufacturers can compete with anyone. But when
China and other countries manipulate currency, that's not competition - it's
cheating. Currency manipulation gives Chinese manufacturers a 40 percent
cost advantage. If we're serious about boosting exports - and creating jobs
in American manufacturing - we need to crack down on practices like currency
manipulation. We owe it to American workers and American businesses. Trade
distorted by currency manipulation isn't fair or free -- it's a sinkhole."

Senator Brownback said: "After years of China refusing to be honest in its
currency policy, I look forward to seeing the U.S. take a definitive stance
to bring an end to Chinese currency manipulation.  I'm glad to join a
bipartisan group of my colleagues to combat this issue that has very serious
and very real consequences for the U.S. economy."  

Senator Bayh said: "Currency manipulation costs American jobs and runs
counter to fair trade practices. American companies and workers can compete
with anybody and sell their products anywhere if they're allowed to compete
on a level playing field. This legislation puts an end to the massive,
artificial advantage that countries engaging in currency manipulation give
to their businesses."  

Senator Snowe, a senior member of the Senate Finance Committee, which has
jurisdiction over trade issues, said: "For too long, excessive currency
market intervention has given unearned advantages to our foreign competitors
at the expense of businesses and workers in the United States. Manufacturers
and workers in trade-sensitive industries - such as paper production in
Maine - have been harmed by China's mercantilist trade practices and,
unfortunately, the silence of our government on China's currency
manipulation has become the silence of our factories.  This legislation will
ensure our government has the tools to adequately address these inequities
and provide consequences for countries that violate our global trade rules
by holding down the value of their currency."

Senator Cardin said: "As we focus on strengthening our economy and creating
jobs, we cannot lose sight of fair global trade practices - America cannot
stand alone while our competitors break the rules. China's level of economic
growth and new capacity is a direct result of their currency manipulation.
This puts good jobs in Maryland and around the country at risk. A local
Maryland company, NewPage Paper, is just one example of the good American
companies struggling to keep up with these types of unfair practices."

Senator Casey said: "China's currency manipulation has had a profound
negative effect on U.S. workers, industry and economy. China has been
allowed to develop an unfair advantage while going virtually unchecked.  A
comprehensive approach is required to level the playing field for
Pennsylvania workers." 

Senator Levin said: "American companies are not just competing against
foreign companies; they're competing against foreign countries," Levin said.
"This is especially true when foreign governments like China and Japan
manipulate the value of their currency to keep its value artificially low.
Currency manipulation makes Chinese and Japanese exports unfairly cheap and
U.S. products more expensive in China and Japan, displacing U.S. production
and jobs.  This is nothing short of a government subsidy and we should be
doing all we can to fight back against such harmful unfair trade practices."

Senator Feingold said: "Our trade agreements with China have been
devastating for Wisconsin manufacturers and have contributed to tens of
thousands of jobs leaving the state. China's manipulation of its currency
puts American manufacturers at a huge disadvantage. American businesses
deserve a level playing field and our government needs to take seriously
these unfair practices that have been hurting our national, state and local
economies for years."

Senator Gillibrand, a member of the Senate Foreign Relations Committee,
said: "These tough economic times have made it clear that China's
artificially low exchange rate is hurting New York's economy. Our
manufacturers are being forced to compete on an unfair playing field. This
bipartisan legislation is a comprehensive approach to address the situation
and promote a fair exchange rate. I will continue to work with Senators
Schumer and Stabenow and the Administration to press China to adopt trade
policies that do not hurt New York workers or undermine the global economy."

Senator Webb said: "China has been manipulating its currency for years,
unfairly subsidizing its exports at the expense of not only jobs here in the
United States, but also to the detriment of the world economy. This bill
provides the tools to address these practices and properly level the playing
field." 

Senator Specter said: "We have lost 2.3 million jobs from 2001 and 2007 as a
result of the trade imbalance with China, due in no small part to the fact
that China continues to manipulate its currency.  This legislation will help
level the playing field and signals our determination to take a stand to
stop this form of international banditry and help our domestic
manufacturers."

By manipulating its currency, countries can gain an unfair advantage over
U.S. manufacturers by effectively lowering the price of their exports as
compared to domestic goods. Currency manipulation also imposes a direct cost
on U.S. exports, making American goods sold abroad more expensive. This
creates an unfair trade advantage, which ultimately harms U.S.
manufacturers, workers, and farmers, and contributes significantly to the
U.S. trade imbalance.

Currency misalignment and the continuing trade imbalance with China have
severely impacted the U.S. manufacturing sector in relation to both domestic
sales and exports. The U.S. has lost over 5.3 million manufacturing jobs in
the last decade.  Since the beginning of the recession, millions of
Americans have lost their jobs and unemployment has been hovering around 10
percent for several months.

The debate about China's currency manipulation has been going on in the
Senate since 2004, when the U.S. trade deficit with China ballooned to the
largest imbalance ever recorded with a single country, in part because China
undervalued its currency by  pegging it to the U.S. dollar. In 2005, Schumer
and Graham offered the first legislation to combat China's currency
manipulation by imposing 27.5 percent tariffs on Chinese goods. The bill
helped put pressure on the China, which slowly began letting the yuan
appreciate that same year. But today, according to the Peterson Institute
for International Economics, China's currency remains between 25 and 40
percent undervalued against the dollar. This is fundamentally the same level
of undervaluation that existed in 2005.

In a written response to questions asked as part of his confirmation hearing
last year, Treasury Secretary Timothy Geithner said that he believed China
was manipulating its currency to create an unfair trade advantage. However,
Treasury stopped short of listing China as a currency manipulator in its
most recent report. While China has taken small steps to increase the value
of the renminbi since they threatened legislative action in 2007, China has
not done enough and is still keeping its currency misaligned in order to
gain an unfair trade advantage. 

The Currency Exchange Rate Oversight Reform Act of 2010 combines the best
elements of the Schumer-Graham bill that was passed by the Senate Finance
Committee in 2007 and a separate measure advanced by Senators Stabenow,
Brown and Snowe. It would:

.         Create a new approach to identifying currency manipulators by
requiring that the Treasury Department base its determination strictly on
objective measures related to currency exchange rates. Under current law,
Treasury also has to determine that the misalignment is a willful attempt to
gain a trade advantage before it can cite the country. The new legislation
would eliminate the need to show intent.

*	Establish important consequences immediately upon designation,
moderately severe consequences if consultations have not resulted in
appropriate policies and identifiable actions to eliminate misalignment
after 90 days, and more severe consequences if consultations have not
resulted in appropriate policies and identifiable actions to eliminate
misalignment after 360 days. 

.         Establish two tracks by which the Department of Commerce can take
action should a foreign country refuse to float its currency.  One path
would be to utilize anti-dumping laws to enable Commerce to counter the
effect of misaligned currency, as outlined in the previous Schumer-Graham
legislation.  The other path, originally contained in the
Stabenow-Snowe-Brown legislation, would allow Commerce to apply
countervailing duties to goods coming into the United States from nations
that misalign their currency.

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