United States of America: Bill to impose sanctions on countries that manipulate currencies
Description
The House of Representatives on September 29 by an overwhelming, bipartisan vote of 348-79 passed the “Currency Reform for Fair Trade Act” (H.R.2378). The bill would make an undervalued (or overvalued) currency exchange rate a countervailable subsidy under U.S. trade law. China is the chief target of the bill.said on October 1 that the Senate leadership will bring the bill to the Senate floor during the lame-duck (post-election) session that is currently expected to run November 15-December 3. There will however be a very large number of bills that will compete with the currency-manipulation legislation for floor action during that brief period, and the perceived urgency of addressing the U.S.-China trade problem may be less prominent immediately after the election than it is in this pre-election season..
The bill now moves to the Senate, where Senator Charles Schumer (Democrat-New York) is the chief sponsor. Senator Schumer
The Senate version of the bill would build upon a law already on the books in the United States that requires the Treasury to determine whether any countries “manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.” This law (section 3004 of the Omnibus Trade and Competitiveness Act of 1988) further provides for “negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar to permit effective balance of payments adjustments and to eliminate the unfair advantage.” The Report to Congress on International Economic and Exchange Rate Policies usually are produced on or about mid-April and mid-October.
The new bill would build on these reports by limiting the discretion that the executive branch has to respond to findings of currency manipulation. It would require the Treasury Department to place sanctions on an offending country if mandatory negotiations fail to correct currency misalignment, and reduce Treasury’s ability to judge “intent” in its determination of whether a foreign country is manipulating its currency to gain an unfair competitive advantage in international trade. The bill would further require the Commerce Department to investigate currency undervaluation as a countervailable subsidy under U.S. law.
The bill would limit presidential waiver authority. Following the labeling of a country as a “priority” currency manipulator, the president would be allowed to use his waiver authority against applying the first punitive action required at a 90-day deadline, if the action would harm national security or vital economic interests of the United States. The president would be required to report to Congress how the adverse impact on the United States of taking action would be greater than the potential benefits of taking the punitive course. After that, however, if the president again used his waiver authority, he would have to explain to Congress how taking action would be “out of proportion” to the benefits of retaliation. Congress would reserve the right to introduce a joint resolution of disapproval of the waiver. If the joint resolution passed Congress and were vetoed, Congress would have to win a vote of two-thirds of both houses to override the veto. The bill would establish a new consultative body that Treasury would be obligated to consult as the report is drafted.
The Ways and Means Committee in the House of Representatives held a hearing on this issue on March 24, 2010. It heard testimony from four experts on international trade: C. Fred Bergsten of the Peterson Institute for International Economics, Niall Ferguson of Harvard University, Philip I. Levy of the American Enterprise Institute, and Clyde V. Prestowitz of the Economic Strategy Institute.
In other related action, a bipartisan group of 130 House members on March 15, 2010 co-signed a letter to Treasury Secretary Tim Geithner and Commerce Secretary Gary Locke calling for administration action to fight alleged currency manipulation by China. Their letter called on the Commerce Department to apply countervailing duty law “in defense of American companies who have suffered as a result of the currency manipulation.” They also called on the Treasury Department to make sure that China is named in the upcoming report on currency manipulation.
The legislators also called for “intense diplomatic efforts, not only with China but also with the International Monetary Fund and multilaterally with other countries” to compel China to reconsider its exchange rate policy. “If these efforts are not successful,” the congressmen wrote, “we ask the Administration to consider all the tools at its disposal, including the application of a tariff on Chinese imports, to respond to China’s currency manipulation.”
Any Evidence-Based Deliberation:
| Question | Result |
|---|---|
| Is there anything in the public record to suggest that evidence of the effectiveness of the proposed measure was considered during official deliberations? | No |
| Is there any evidence that alternatives to the proposed measure were considered? | No |
| Is there anything in the public record that suggests that empirical evidence informed the comparison across the alternatives available to government? | No |
| Was such evidence identified? | No |
| Is such evidence publicly available? | No |
| Did the official decision-maker in question provide an explanation as to why a chosen measure was favoured over alternatives? | No |
| Is there any evidence to suggest that potentially affected trading partners were consulted before the measures were taken? | No |
| Is there any evidence that safeguards have been put in place to ensure that implementation of the initiative is transparent and non-discriminatory? | No |
| Did the government state its intention to review the measure within one year of implementation? | No |
Date Discovered:
Implemented: No
Date of inception:
GTA Evaluation: Amber
Source:
See the hyperlinked materials in the description.
Government Response:
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