With the economy still struggling, a bipartisan group of senators unveiled new legislation Thursday that will crack down on China's currency manipulation, which costs millions of U.S. jobs and that unfairly and negatively impacts U.S. trade. A recent report estimated that if the yuan and satellite currencies were revalued to their equilibrium level, up to 2.25 million jobs could be created through an increase in U.S. Gross Domestic Product (GDP).
The bill is the product of a merger of legislation sponsored by Senators Charles E. Schumer and Lindsey Graham that passed the Senate Finance Committee in 2007 and an alternate proposal championed by Senators Sherrod Brown and Olympia Snowe. Legislation identical to the Brown-Snowe measure passed the House last year by a vote of 378-49. The new legislation brings together a diverse coalition of advocates and Senators including 20 original co-sponsors: Sens. Sherrod Brown, Charles Schumer, Lindsey Graham, Olympia Snowe, Debbie Stabenow, Jeff Sessions, Robert Casey, Richard Burr, Sheldon Whitehouse, Jack Reed, Richard Blumenthal, Kent Conrad, Carl Levin, Kirsten Gillibrand, Bob Menendez, Kay Hagan, Joe Manchin and Ben Nelson. The senators unveiled their new legislation today and pledged to push for a vote on the floor of both Houses before the end of the year.
Senator Brown: "How much longer is Congress willing to stand by and watch thousands of jobs move to China? We know that two million jobs hang in the balance when it comes currency manipulation. It's time to put American jobs and American workers first," Browns said. "The illegal and unfair manipulation of the yuan by the Chinese government has gone on for far too long--and Ohio manufacturers and workers have paid the price. Rhetoric has done little to solve the problem. We must equip the Obama Administration with the tools it needs to crack down on China's currency manipulation and help level the playing field for American businesses."
Senator Schumer: "This strong bipartisan legislation is a clear, unwavering message from both parties to China's leaders- the jig is up, it's time to stop gaming the system or face severe consequences. China's history of half-truths and broken promises on currency makes passing this legislation an economic imperative. There will be a bipartisan push to send this bill to the President's desk this year."
Senator Graham said: "This bipartisan legislation is desperately needed," said U.S. Senator Lindsey Graham (R-South Carolina). "We provide the Departments of Commerce and Treasury tools to fight back against Chinese currency manipulation. China's economy is simply too large for it to be artificially propped up by a blatantly manipulated Yuan. China's actions are deliberate and are designed to give China a competitive advantage in the marketplace. In the United States we need to change the way we tax, regulate and litigate. But we also need to push back against unfair trade practices which continue to cost our nation jobs. I believe free and fair trade is beneficial, but I also know that currency manipulation and intellectual property theft like what we see in China, is doing harm to our economy."
Senator Stabenow: "China's illegal currency manipulation directly translates to lost American jobs and suffering for families, especially in Michigan," said Sen. Stabenow. "Effectively addressing this problem would create American jobs and it wouldn't cost a dime. I've been fighting to stop China's illegal action on currency for years, and with bipartisan momentum growing, now is the time for Congress to finally crack down on China."
Senator Sessions: "Free markets and free commerce have been an engine of progress throughout the world and, from our earliest days, have been a source of great strength for this nation. But, like Democracy, free trade must operate under a set of rules and principles. China's currency manipulation offends that core idea. And it harms American workers and shutters American factories at a time when we can least afford it. US authorities should negotiate on behalf of American workers -- not against them. As we continue to expand free trade in the world we must remain diligent in upholding our common values. We must defend American interests. That we have not done so is further proof of what's wrong with Washington: we're more concerned about just getting things done, than getting them done right."
Senator Snowe: "America cannot afford to allow currency manipulation to continue in rampant disregard of our international trade laws," said Senator Snowe. "Manufacturers and workers in trade-sensitive industries, including Maine's paper production industry, have already been harmed by China's enduring mercantilist trade practices. This legislation will stand-up for American jobs and competitiveness by investigating and penalizing governments that engage in currency manipulation. Passing this bill would also send a clear message that Congress and the President have a zero-tolerance policy when it comes to such destructive practices."
Senator Burr: "The trade deficit we have with China represents a dire threat to our economy and has resulted in fewer American exports and the loss of millions of American manufacturing jobs, including many in North Carolina. This trade deficit is due, in large part, to China undervaluing its currency which is an issue we must address in order to re-establish our competitiveness in the global marketplace."
Senator Casey: "For too long, this issue has festered, harming not only American companies and workers. China's illegal practices make Chinese-produced goods cheaper than similar products made in America, driving up our trade deficit with China and putting Americans out of work. The United States' trade deficit with China has cost Pennsylvania tens of thousands of jobs. Enough is enough"
Senator Hagan: "The manufacturing industry has a rich history in North Carolina, but in recent years our state has lost too many manufacturing jobs to an unfair trading environment," said Hagan. "North Carolina has seen the fourth-largest decline in manufacturing jobs in the past decade. This bill targets the unfair trade practice of currency manipulation by China, and ensures that American manufacturers can compete in the 21st century global economy."
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. In 2010, Brown and Snowe introduced legislation that clarifies that countervailing duties may be imposed to address subsidies relating to an undervalued currency.
China's ongoing undervaluation of the yuan continues to cause severe economic disruptions and imbalances globally and is taking a huge toll on manufacturers and workers across the United States. Moreover, failure to address China's currency manipulation has emboldened China to countenance other market-distorting policies, including discriminatory indigenous innovation policies and inadequate protection of intellectual property, that benefit companies in China at the expense of U.S. companies and workers.
Over the past decade, the nation has lost approximately 6 million manufacturing jobs and seen 57,000 manufacturing plants shut down forever. According to a new Economic Policy Institute study, 1.9 million of those manufacturing jobs were lost or displaced as a result of increased trade with China and the Chinese government's manipulation of its currency. Moreover, since China joined the World Trade Organization in 2001, our trade deficit with the country has increased from $83 billion to a record of $273 billion in 2010. Addressing currency manipulation would yield significant benefits to the U.S. economy. According to the study, addressing China's currency manipulation would positively impact the U.S. economy over the next 18 to 24 months by creating a 1.9% increase in GDP [$285.7 billion], $71.4 million in annual deficit reduction, and 2.25 million American jobs.
The Currency Exchange Rate Oversight Reform Act of 2011 is intended to reform and enhance oversight of currency exchange rates. The legislation 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 Brown and Snowe that passed the House in 2010 by a vote of 378-49. Specifically, the legislation would:
· Trigger tough consequences for countries that fail to adopt appropriate policies to eliminate currency misalignment.
· Ensure tools, such as the U.S. trade laws, may be used to counter the economic harm to U.S. manufacturers caused by currency manipulation.
A full summary of the bill appears below:
THE CURRENCY EXCHANGE RATE OVERSIGHT REFORM ACT OF 2011
Specifies Consequences for Countries that Fail to Eliminate Currency Misalignment and
Provides Tools to Address Impact of Currency Misalignment of U.S. Industries
The Brown-Schumer-Graham-Snowe-Stabenow-Sessions-Casey-Burr Currency Exchange Rate Oversight Act of 2011 will reform and enhance oversight of currency exchange rates. This strong, bipartisan bill combines the best elements of a Schumer-Graham bill that was passed by the Senate Finance Committee in 2007 and separate legislation introduced this year by Senators Brown and Snowe that passed the House of Representatives in 2010. The merged bill uses U.S. trade law to counter the economic harm to U.S. manufacturers caused by currency manipulation. The new combined bill also 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.
Improves Oversight of Currency Exchange Rates. 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 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.
Clarifies Countervailing Duty Law Can Address Currency Undervaluation. Under existing trade laws, if the Commerce Department and the International Trade Commission find that subsidized imports are causing economic harm to American manufacturers and workers, the administration must impose duties on those imports to offset ("countervail") the benefit conferred on foreign producers and exporters by the government subsidies. Commerce already has authority under U.S. law to investigate whether currency undervaluation by a government provides a countervailable subsidy, although it has failed to do so despite repeated requests to investigate from a wide range of U.S. industries. The bill specifies the applicable investigation initiation standard, which will require Commerce to investigate whether currency undervaluation by a government provides a countervailable subsidy if a U.S. industry requests investigation and provides proper documentation.
Includes WTO-Consistent, Key Provision from Brown-Snowe Currency Reform for Fair Trade Act (S.328) and House-passed Currency Legislation. In previous countervailing duty investigations, Commerce has refused to find an export subsidy if the subsidy is not limited exclusively to circumstances of export (i.e., when non-exporters also may benefit). The bill precludes Commerce from imposing this bright-line rule, and clarifies that Commerce may not refuse to investigate a subsidy allegation based on the single fact that a subsidy is available in circumstances in addition to export. This clarification is supported by dispute settlement rulings of the World Trade Organization's Appellate Body (e.g., in the case involving taxation of foreign sales corporations) and is the key element of the Brown-Snowe currency bill and the currency bill that passed the House (H.R.2378) in September 2010 with overwhelming bipartisan support.
Establishes New Objective Criteria to Identify Misaligned Currencies. 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.
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.Consider designation of a country's currency as a "priority" currency when determining whether to grant the country "market economy" status for purpose of U.S. antidumping law.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.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. The AFL-CIO, a voluntary federation of 55 unions, representing 12.2 million members.The American Iron and Steel Institute (AISI), whose member companies produce approximately 80 percent of the steel made in the United States.The International Union, United Automobile, Aerospace & Agricultural Implement Workers of America (UAW), one of the nation's most diverse unions, representing workers in manufacturing, health care, higher education, gaming, public service and other sectors.The Tooling, Manufacturing & Technologies Association (TMTA), whose members include businesses in the metalworking, manufacturing and technologies industries.The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW),the largest industrial union in North America, with 850,000 active members working in a broad range of industries, including steel, tires, glass, paper, shipbuilding, oil refining, and mining.
· The International Association of Machinists and Aerospace Workers (IAM), representing 720,000 members across North America.
· The Alliance for American Manufacturing (AAM), a labor-management partnership between USW and American manufacturers.
· The Coalition for a Prosperous America, representing agriculture production, manufacturing and worker interests.
· The United Food and Commercial Workers International Union (UFCW), representing more than 1.3 million workers in retail, meatpacking, food processing, poultry and manufacturing industries.