Sens. Brown, Snowe Introduce Legislation to Combat Chinese Currency Manipulation

WASHINGTON, D.C.—U.S. Sens. Sherrod Brown (D-OH) and Olympia Snowe (R-ME) today announced the introduction of the Currency Reform for Fair Trade Act of 2011, legislation that will give the Obama Administration additional tools to address China’s currency manipulation.

“China’s unfair currency manipulation has gone on for far too long. With factory doors continuing to close across my state, Ohio workers and small businesses can’t afford to wait any more,” Brown said. “The Chinese government has taken small steps to allow the yuan to appreciate, but it is not enough. Congress must take action immediately to address Chinese currency manipulation and pass legislation that will empower our government to combat this illegal trade subsidy. By combating currency manipulation, we can help level the playing field for American manufacturers and speed up our economic recovery.”

Senator Snowe said, “One significant contributing factor to the withering of our country’s once-unparalleled manufacturing base is the fact that China’s government deliberately suppresses the renminbi’s value, making Chinese imports artificially cheaper when competing against U.S. products.  I am pleased to introduce the Currency Reform for Fair Trade Act to ensure the government is equipped to respond to this manipulation on behalf of our nation’s workers by imposing countervailing duties on subsidized exports from countries that continue to undervalue their currency at the expense of competing American businesses.  I look forward to working with my colleagues to enact these vital provisions into law to prevent our trading partners from further undercutting true market competition and undermining American innovation.”

The legislation introduced today is similar to the 111th Congress bill H.R. 2378, the Currency Reform for Fair Trade Act of 2010, which passed the House of Representatives last September by a vote of 348-79. The legislation, which directs the U.S. Department of Commerce to treat currency undervaluation as a prohibited export subsidy, would ensure the government is equipped to respond on behalf of American workers and manufacturers by imposing countervailing duties on subsidized exports from countries like China. Brown, joined by a bipartisan group of members from the U.S. House of Representatives, held a news conference today in Washington to announce the legislation.

The impact of China’s currency manipulation has been widely documented by economists:

  • Paul Krugman, winner of the 2008 Nobel Prize in Economics, estimates that China’s exchange rate policy reduces U.S. GDP by 1.4 to 1.5 percentage points annually and reduces U.S. employment by 1.4 or 1.5 million jobs.[1]
  • Fred Bergsten, Director of the Peterson Institute for International Economics, estimates that a 20-40% appreciation of the RMB would result in $100-$150 billion improvement in the U.S. trade deficit and would generate 700,000 to 1 million jobs in the United States.[2]
  • Steven Dunaway, a former IMF official and senior fellow at the Council on Foreign Relations, has noted that some analysts expect an appreciation would add half a percentage point to GDP in the United States and other developed countries.”[3]

Sens. Brown and Snowe have been leaders in Senate efforts to address Chinese currency manipulation. Last month, in advance of President Hu Jintao’s visit, Brown and Snowe announced plans to introduce bipartisan legislation to address China’s unlawful practice of currency manipulation. Last December, Brown and Snowe also filed Chinese currency legislation as an amendment to the tax extenders legislation. Previously, Brown and Snowe had sent a letter to Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell urging action before the Senate adjourned for the year on the Currency Reform for Fair Trade Act.

 

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[1]   See Paul Krugman, “Chinese New Year,” New York Times, January 1, 2010 (China “follows a mercantilist policy, keeping its trade surplus artificially high.  And in today’s depressed world, that policy is, to put it bluntly, predatory.”); and Comments at Economic Policy Institute Forum, March 12, 2010.

[2]   C. Fred Bergsten, Comments at Economic Policy Institute Forum, March 12, 2010; C. Fred Bergsten, “How Best to Boost Exports,” Washington Post, February 3, 2010; A15 (The exchange rate “is the most important factor in determining U.S. export competitiveness.”). 

[3]   Steven Dunaway, “China’s Exchange Rate Policy:  The Heat Is On,” Council on Foreign Relations Expert Brief, February 18, 2010.

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