WASHINGTON, DC - A bipartisan group of 14 U.S. senators announced new legislation today to vigorously address China's chronic undervaluing of its currency that unfairly impacts U.S. trade. The proposal will outline 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.

"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," Brown said. "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."

The bill comes two days after the Chinese Premier rejected calls for China to float its currency, which is estimated to be undervalued by 25 to 40 percent compared with the dollar. 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; creating an unfair trade advantage, which ultimately harms U.S. manufacturers, workers, and farmers, and contributes 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 more than 5.3 million manufacturing jobs in the last decade.

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. Treasury, however, 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 the Treasury Department 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 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.

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).

Last week, Sen. Brown wrote to Treasury Sec. Timothy Geithner urging him to designate China as a currency manipulator in its Semiannual Report on International Economic Exchange Rate Policies. He argued that the artificial devaluation of the Chinese currency has damaged the American manufacturing industry.

In February, Sen. Brown joined a bipartisan letter with 14 Senators urging Commerce Sec. Gary Locke to investigate whether China's currency policy provides an unfair subsidy for Chinese paper products that should be remedied through trade measures.


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