WASHINGTON, D.C. – With more than two million jobs hanging in the balance, a bipartisan group of Senators— led by U.S. Sen. Sherrod Brown (D-OH)—today unveiled new jobs legislation that will crack down on China’s currency manipulation. The legislation comes on the heels of new report released earlier this week from the Economic Policy Institute (EPI) and the Alliance for American Manufacturing which shows that that the growing trade deficit with China has cost the United States more than 2.8 million jobs since 2001, including more than 1.9 million manufacturing jobs. A separate report from June from the EPI 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).
“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 to currency manipulation. It’s time to put American jobs and American workers first,” Brown 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.”
The new bill combines bipartisan legislation authored by Brown and Senator Olympia Snowe (R-ME) with a bill introduced by Senators Charles E. Schumer (D-NY) and Lindsey Graham (R-SC). Legislation identical to the Brown-Snowe measure passed the House last year by a vote of 378-49, and Schumer and Graham’s proposal cleared the Senate Finance Committee in 2007. 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.
Earlier this month, new trade deficit numbers were released by the U.S. Department of Commerce showing that the trade deficit with China had widened from $26.7 billion in June to $27 billion in July. The trade deficit with China through July 2011 totaled $160 billion, up from $145 billion over the same time period in 2010. 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 tariff 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.
Over the past decade, the nation has lost approximately six million manufacturing jobs and seen 57,000 manufacturing plants shut down. 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.
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:
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:
After 90 days of failure to adopt appropriate policies, the administration must:
After 360 days of failure to adopt appropriate policies, the administration must:
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 –