With the economy still struggling, U.S. Senators Debbie Stabenow and Carl Levin, along with a bipartisan group of their colleagues, today unveiled new legislation that will crack down on currency manipulation by China and other nations, 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).
"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."
"American companies are not just competing against foreign companies; they're competing against foreign countries," Sen. 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."
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.
Senators Stabenow and Levin have been leaders on this issue for several years, as co-sponsors of legislation since 2003. In addition, Senator Stabenow authored her own proposal in 2007.
Earlier this year, ahead of the G-20 meeting, they called on Treasury Secretary Timothy Geithner to take action on this matter. Over the years the senators have sent numerous letters to several administrations calling for strong action against Chinese currency manipulation.
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 new legislation brings together a diverse coalition of Senators including 19 original co-sponsors alongside Senators Stabenow and Levin: Sens. Sherrod Brown, Charles Schumer, Lindsey Graham, Olympia Snowe, Jeff Sessions, Robert Casey, Richard Burr, Sheldon Whitehouse, Jack Reed, Richard Blumenthal, Kent Conrad, Kirsten Gillibrand, Bob Menendez, Kay Hagan, Joe Manchin and Ben Nelson.
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.
The Senators pledged to push for a vote on the floor of both chambers of Congress before the end of the year.
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.
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 Banking and Finance Committees, as well and the Financial Services and House Ways and Means Committees. The members must have demonstrated expertise in finance, economics, or currency exchange.
The bill is supported by -
* The Fair Currency Coalition (FCC), a group of U.S. manufacturing, service, agricultural, and labor organizations, including over 300 companies and organizations.
* The Committee to Support U.S. Trade Laws (CSUSTL), an organization of almost 100 companies, trade associations, labor unions - including farmers unions, workers, and individuals, spanning all sectors, including manufacturing, technology, agriculture, mining and energy, and services.
* The American Wire Producers Association (AWPA), whose members include wire producers, manufacturers and distributors of wire rod, and suppliers of machinery, dies and equipment to the wire industry.
* 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.