S. 328: Currency Reform for Fair Trade Act & H.R. 639: Currency Reform for Fair Trade Act

Legislation has been introduced in Congress that could curb the effect of Chinese currency manipulation on the U.S., but since its introduction, the bill has stalled in committee and no action has been taken on this crucial measure.

In February Senators Sherrod Brown (D-OH) and Olympia Snowe (R-ME), along with Representatives Sander Levin (D-MI), Tim Murphy (R-PA), and Tim Ryan (D-OH) introduced versions of the Currency Reform for Fair Trade Act of 2011 in the Senate (S. 328) and House (H.R. 639), respectively. The House version of the bill currently has 156 cosponsors, while the Senate version has 12.

The goal of the legislation is to level the playing field for American businesses that have been hurt by foreign currency devaluation, largely perpetrated by China. The bill would allow undervalued currency to be viewed as a subsidy under U.S. trade law, which would allow companies to seek higher countervailing duties on imports.

“China has been given free rein to manipulate its currency for far too long, with hundreds of thousands of American jobs lost and unsustainable global trade imbalances as a result,” said Rep. Levin, D-Mich.

“Those imbalances contributed to the global economic crisis, and most experts expect the imbalances will worsen in the coming years unless there is a significant change in the status quo. The measures included in this bill provide the Administration with additional tools for enforcing the rules of trade…”

An identical bill was introduced in the 111th Congress and received broad, bipartisan support. The bill passed the House last year with a 348-79 vote, with 99 of the “Yea” votes coming from Republicans. Unfortunately, the bill was never voted on in the Senate, which necessitated its reintroduction this year.

Despite support for the previous bill, the current bill is stuck in committee in both the House and Senate with no sign of movement.

Failure to act on this bill is failure to act for American businesses and American jobs. The undervaluation of the yuan has been a major factor in China’s accumulation of a massive trade surplus with the U.S. A study published earlier this year by the Economic Policy Institute found that devaluation of the Chinese yuan and its satellite currencies may be costing the U.S. as much as $285.7 billion in GDP, and 2.25 million jobs.

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S. 328: Currency Reform for Fair Trade Act

H.R. 639: Currency Reform for Fair Trade Act

S 328 IS

112th CONGRESS

1st Session

S. 328

To amend title VII of the Tariff Act of 1930 to clarify that countervailing duties may be imposed to address subsidies relating to a fundamentally undervalued currency of any foreign country.

IN THE SENATE OF THE UNITED STATES

February 14, 2011

Mr. BROWN of Ohio (for himself and Ms. SNOWE) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend title VII of the Tariff Act of 1930 to clarify that countervailing duties may be imposed to address subsidies relating to a fundamentally undervalued currency of any foreign country.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Currency Reform for Fair Trade Act’.

SEC. 2. CLARIFICATION REGARDING DEFINITION OF COUNTERVAILABLE SUBSIDY.

(a) Benefit Conferred- Section 771(5)(E) of the Tariff Act of 1930 (19 U.S.C. 1677(5)(E)) is amended–

(1) in clause (iii), by striking ‘and’ at the end;

(2) in clause (iv), by striking the period at the end and inserting ‘, and’; and

(3) by inserting after clause (iv) the following new clause:

‘(v) in the case in which the currency of a country in which the subject merchandise is produced is exchanged for foreign currency obtained from export transactions, and the currency of such country is a fundamentally undervalued currency, as defined in paragraph (37), the difference between the amount of the currency of such country provided and the amount of the currency of such country that would have been provided if the real effective exchange rate of the currency of such country were not undervalued, as determined pursuant to paragraph (38).’.

(b) Export Subsidy- Section 771(5A)(B) of the Tariff Act of 1930 (19 U.S.C. 1677(5A)(B)) is amended by adding at the end the following new sentence: ‘In the case of a subsidy relating to a fundamentally undervalued currency, the fact that the subsidy may also be provided in circumstances not involving export shall not, for that reason alone, mean that the subsidy cannot be considered contingent upon export performance.’.

(c) Definition of Fundamentally Undervalued Currency- Section 771 of the Tariff Act of 1930 (19 U.S.C. 1677) is amended by adding at the end the following new paragraph:

‘(37) FUNDAMENTALLY UNDERVALUED CURRENCY- The administering authority shall determine that the currency of a country in which the subject merchandise is produced is a ‘fundamentally undervalued currency’ if–

‘(A) the government of the country (including any public entity within the territory of the country) engages in protracted, large-scale intervention in one or more foreign exchange markets during part or all of the 18-month period that represents the most recent 18 months for which the information required under paragraph (38) is reasonably available, but that does not include any period of time later than the final month in the period of investigation or the period of review, as applicable;

‘(B) the real effective exchange rate of the currency is undervalued by at least 5 percent, on average and as calculated under paragraph (38), relative to the equilibrium real effective exchange rate for the country’s currency during the 18-month period;

‘(C) during the 18-month period, the country has experienced significant and persistent global current account surpluses; and

‘(D) during the 18-month period, the foreign asset reserves held by the government of the country exceed–

‘(i) the amount necessary to repay all debt obligations of the government falling due within the coming 12 months;

‘(ii) 20 percent of the country’s money supply, using standard measures of M2; and

‘(iii) the value of the country’s imports during the previous 4 months.’.

(d) Definition of Real Effective Exchange Rate Undervaluation- Section 771 of the Tariff Act of 1930 (19 U.S.C. 1677), as amended by subsection (c) of this section, is further amended by adding at the end the following new paragraph:

‘(38) REAL EFFECTIVE EXCHANGE RATE UNDERVALUATION- The calculation of real effective exchange rate undervaluation, for purposes of paragraph (5)(E)(v) and paragraph (37), shall–

‘(A)(i) rely upon, and where appropriate be the simple average of, the results yielded from application of the approaches described in the guidelines of the International Monetary Fund’s Consultative Group on Exchange Rate Issues; or

‘(ii) if the guidelines of the International Monetary Fund’s Consultative Group on Exchange Rate Issues are not available, be based on generally accepted economic and econometric techniques and methodologies to measure the level of undervaluation;

‘(B) rely upon data that are publicly available, reliable, and compiled and maintained by the International Monetary Fund or, if the International Monetary Fund cannot provide the data, by other international organizations or by national governments; and

‘(C) use inflation-adjusted, trade-weighted exchange rates.’.

SEC. 3. REPORT ON IMPLEMENTATION OF ACT.

(a) In General- Not later than 9 months after the date of the enactment of this Act, the Comptroller General of the United States shall submit to Congress a report on the implementation of the amendments made by this Act.

(b) Matters To Be Included- The report required by subsection (a) shall include a description of the extent to which United States industries that have been materially injured by reason of imports of subject merchandise produced in foreign countries with fundamentally undervalued currencies have received relief under title VII of the Tariff Act of 1930 (19 U.S.C. 1671 et seq.), as amended by this Act.

SEC. 4. APPLICATION TO GOODS FROM CANADA AND MEXICO.

Pursuant to article 1902 of the North American Free Trade Agreement and section 408 of the North American Free Trade Agreement Implementation Act of 1993 (19 U.S.C. 3438), the amendments made by section 2 of this Act shall apply to goods from Canada and Mexico.

HR 639 IH

112th CONGRESS

1st Session

H. R. 639

To amend title VII of the Tariff Act of 1930 to clarify that countervailing duties may be imposed to address subsidies relating to a fundamentally undervalued currency of any foreign country.

IN THE HOUSE OF REPRESENTATIVES

February 10, 2011

Mr. LEVIN (for himself, Mr. ACKERMAN, Mr. ALTMIRE, Mr. AUSTRIA, Mr. BECERRA, Ms. BERKLEY, Mr. BISHOP of Georgia, Mr. BISHOP of Utah, Mr. BLUMENAUER, Mr. BOSWELL, Mr. BRALEY of Iowa, Mr. BURTON of Indiana, Mr. CARSON of Indiana, Mr. CICILLINE, Mr. CLARKE of Michigan, Mr. COBLE, Mr. COHEN, Mr. CONNOLLY of Virginia, Mr. CONYERS, Mr. COSTELLO, Mr. COURTNEY, Mr. CRAVAACK, Mr. CRITZ, Mr. DAVIS of Illinois, Mr. DEFAZIO, Ms. DELAURO, Mr. DINGELL, Mr. DONNELLY of Indiana, Mr. DOYLE, Mr. ELLISON, Mr. FILNER, Mr. FRANK of Massachusetts, Mr. GARAMENDI, Mr. GENE GREEN of Texas, Mr. GRIJALVA, Mr. HIGGINS, Mr. HINCHEY, Mr. HOLDEN, Mr. HOLT, Mr. HUNTER, Mr. JOHNSON of Georgia, Mr. JONES, Ms. KAPTUR, Mr. KILDEE, Mr. KISSELL, Mr. KUCINICH, Mr. LARSON of Connecticut, Mr. LATOURETTE, Mr. LEWIS of Georgia, Mr. LIPINSKI, Mr. LOEBSACK, Mr. MANZULLO, Mr. MCHENRY, Ms. MCCOLLUM, Mr. MCCOTTER, Mr. MCDERMOTT, Mr. MCGOVERN, Mr. MCKINLEY, Mr. MICHAUD, Mrs. MILLER of Michigan, Mr. GEORGE MILLER of California, Mr. MURPHY of Connecticut, Mr. MURPHY of Pennsylvania, Mrs. MYRICK, Mr. NEAL, Ms. NORTON, Mr. PALLONE, Mr. PASCRELL, Mr. PETERS, Mr. PETRI, Ms. PINGREE of Maine, Mr. PLATTS, Mr. ROGERS of Kentucky, Mr. ROGERS of Alabama, Mr. ROHRABACHER, Ms. ROYBAL-ALLARD, Mr. RUSH, Mr. RYAN of Ohio, Ms. LINDA T. SANCHEZ of California, Mr. SENSENBRENNER, Ms. SCHAKOWSKY, Mr. SHULER, Mr. SHUSTER, Ms. SLAUGHTER, Mr. STUTZMAN, Mr. STARK, Ms. SUTTON, Mr. THOMPSON of California, Mr. TIERNEY, Mr. TONKO, Mr. TOWNS, Mr. TURNER, Mr. VISCLOSKY, Mr. WELCH, Mr. WOLF, and Ms. WOOLSEY) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend title VII of the Tariff Act of 1930 to clarify that countervailing duties may be imposed to address subsidies relating to a fundamentally undervalued currency of any foreign country.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Currency Reform for Fair Trade Act’.

SEC. 2. CLARIFICATION REGARDING DEFINITION OF COUNTERVAILABLE SUBSIDY.

(a) Benefit Conferred- Section 771(5)(E) of the Tariff Act of 1930 (19 U.S.C. 1677(5)(E)) is amended–

(1) in clause (iii), by striking ‘and’ at the end;

(2) in clause (iv), by striking the period at the end and inserting ‘, and’; and

(3) by inserting after clause (iv) the following new clause:

‘(v) in the case in which the currency of a country in which the subject merchandise is produced is exchanged for foreign currency obtained from export transactions, and the currency of such country is a fundamentally undervalued currency, as defined in paragraph (37), the difference between the amount of the currency of such country provided and the amount of the currency of such country that would have been provided if the real effective exchange rate of the currency of such country were not undervalued, as determined pursuant to paragraph (38).’.

(b) Export Subsidy- Section 771(5A)(B) of the Tariff Act of 1930 (19 U.S.C. 1677(5A)(B)) is amended by adding at the end the following new sentence: ‘In the case of a subsidy relating to a fundamentally undervalued currency, the fact that the subsidy may also be provided in circumstances not involving export shall not, for that reason alone, mean that the subsidy cannot be considered contingent upon export performance.’.

(c) Definition of Fundamentally Undervalued Currency- Section 771 of the Tariff Act of 1930 (19 U.S.C. 1677) is amended by adding at the end the following new paragraph:

‘(37) FUNDAMENTALLY UNDERVALUED CURRENCY- The administering authority shall determine that the currency of a country in which the subject merchandise is produced is a ‘fundamentally undervalued currency’ if–

‘(A) the government of the country (including any public entity within the territory of the country) engages in protracted, large-scale intervention in one or more foreign exchange markets during part or all of the 18-month period that represents the most recent 18 months for which the information required under paragraph (38) is reasonably available, but that does not include any period of time later than the final month in the period of investigation or the period of review, as applicable;

‘(B) the real effective exchange rate of the currency is undervalued by at least 5 percent, on average and as calculated under paragraph (38), relative to the equilibrium real effective exchange rate for the country’s currency during the 18-month period;

‘(C) during the 18-month period, the country has experienced significant and persistent global current account surpluses; and

‘(D) during the 18-month period, the foreign asset reserves held by the government of the country exceed–

‘(i) the amount necessary to repay all debt obligations of the government falling due within the coming 12 months;

‘(ii) 20 percent of the country’s money supply, using standard measures of M2; and

‘(iii) the value of the country’s imports during the previous 4 months.’.

(d) Definition of Real Effective Exchange Rate Undervaluation- Section 771 of the Tariff Act of 1930 (19 U.S.C. 1677), as amended by subsection (c) of this section, is further amended by adding at the end the following new paragraph:

‘(38) REAL EFFECTIVE EXCHANGE RATE UNDERVALUATION- The calculation of real effective exchange rate undervaluation, for purposes of paragraph (5)(E)(v) and paragraph (37), shall–

‘(A)(i) rely upon, and where appropriate be the simple average of, the results yielded from application of the approaches described in the guidelines of the International Monetary Fund’s Consultative Group on Exchange Rate Issues; or

‘(ii) if the guidelines of the International Monetary Fund’s Consultative Group on Exchange Rate Issues are not available, be based on generally accepted economic and econometric techniques and methodologies to measure the level of undervaluation;

‘(B) rely upon data that are publicly available, reliable, and compiled and maintained by the International Monetary Fund or, if the International Monetary Fund cannot provide the data, by other international organizations or by national governments; and

‘(C) use inflation-adjusted, trade-weighted exchange rates.’.

SEC. 3. REPORT ON IMPLEMENTATION OF ACT.

(a) In General- Not later than 9 months after the date of the enactment of this Act, the Comptroller General of the United States shall submit to Congress a report on the implementation of the amendments made by this Act.

(b) Matters To Be Included- The report required by subsection (a) shall include a description of the extent to which United States industries that have been materially injured by reason of imports of subject merchandise produced in foreign countries with fundamentally undervalued currencies have received relief under title VII of the Tariff Act of 1930 (19 U.S.C. 1671 et seq.), as amended by this Act.

SEC. 4. APPLICATION TO GOODS FROM CANADA AND MEXICO.

Pursuant to article 1902 of the North American Free Trade Agreement and section 408 of the North American Free Trade Agreement Implementation Act of 1993 (19 U.S.C. 3438), the amendments made by section 2 of this Act shall apply to goods from Canada and Mexico.

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