As Chinese President Visits Washington, Calls to Protect PA Workers and Employers
PITTSBURGH, PA – U.S. Senator Bob Casey (D-PA) today joined Leo Gerard, President of the United Steelworkers as well as Michael Williams of U.S. Steel to urge the Chinese government to end unfair trade practices that hurt the U.S. economy and cost jobs. On Tuesday, Senator Casey sent a letter to President Obama urging him to press Hu Jintao on the issue while the Chinese President is in Washington. Earlier this week, Senator Casey joined Senators Charles Schumer (D-NY) and Debbie Stabenow (D-MI) announcing their plans to offer legislation to vigorously address currency misalignments that unfairly and negatively impact U.S. trade.
“China’s currency manipulation is bad for Pennsylvania’s industry, workers and economy,” said Senator Casey. “Unfair Chinese policies have cost Pennsylvania jobs and hurt economic growth. Just as workers and businesses are united, the U.S. government must send a unified message to President Hu.”
On Tuesday, Senator Casey sent a letter to President Obama urging him to demand action from President Hu to end unfair trade policies that are harming workers and businesses in Pennsylvania and around the country. In the letter, Casey pressed Obama to focus his upcoming discussions with Hu around intellectual property rights (IPR) protections and currency valuation. In his letter, Senator Casey highlighted a Pennsylvania business to illustrate the harmful impacts of Chinese trade policies on American companies. C.F. Martin & Co., a guitar maker based in Nazareth, Pennsylvania, has been fighting since 2005 to register its mark with the Chinese government to prevent a Chinese individual from selling counterfeit guitars.
China’s inadequate intellectual property protections are well documented, the letter states. Last April, the Office of the United States Trade Representative placed China on its Priority Watch List, citing China’s poor level of IPR protection and enforcement.
Responding to China's repeated failure to float its currency, Senator Casey joined U.S. Senators Charles Schumer (D-NY) and Debbie Stabenow (D-MI) to announce on Monday their plan to introduce The Currency Exchange Rate Oversight Reform Act of 2011, legislation to vigorously address currency misalignments that unfairly and negatively impact U.S. trade. If passed, the legislation would provide less flexibility to the Treasury Department when it comes to citing countries for currency manipulation. It would also impose stiff new penalties on designated countries, including duties on the countries' exports and a ban on any companies from those countries receiving U.S. government contracts.
By manipulating its currency, 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. This creates an unfair trade advantage, which ultimately harms U.S. manufacturers, workers and farmers and contributes significantly 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 over 5.3 million manufacturing jobs in the last decade. Since the beginning of the recession, millions of Americans have lost their jobs and unemployment has been hovering around 10 percent for several months.
A full summary of the bill appears below.
The Currency Exchange Rate Oversight Reform Act of 2011
The Currency Exchange Rate Oversight Act of 2011 will reform and enhance oversight of currency exchange rates. The bill 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.
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.
Establishes New Objective Criteria. 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.
Strengthens Existing Countervailing Duty Law to Address Currency Undervaluation. The legislation clarifies that the Commerce Department already has authority under U.S. law to investigate whether currency undervaluation by a government provides a “countervailable subsidy” and must do so if a U.S. industry requests investigation. In recent years, the Commerce Department has been reluctant to exercise its authority under the law. This legislation, therefore, seeks to strengthen and reaffirm existing law and the Commerce Department’s obligations under the law.
The legislation also makes it clear that the Commerce Department is required to investigate currency undervaluation as a “countervailable subsidy” if Treasury designates a “priority” currency and a U.S. industry requests an investigation. Under existing trade laws, if Commerce and the International Trade Commission find that subsidized imports are causing economic harm to a U.S. industry, the administration must impose duties on those imports to counter the effect of the subsidy.
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:
• Oppose any IMF governance changes that benefit a country whose currency is designated for priority action.
• Determine whether to grant a country “market economy” status for purpose of U.S. antidumping law.
After 90 days of failure to adopt appropriate policies, the administration must:
• Reflect currency undervaluation in dumping calculations for products produced or manufactured in the designated country.
• Forbid federal procurement of goods and services from the designated country unless that country is a member of the WTO Government Procurement Agreement (“GPA”).
• Request the IMF to engage the designated country in special consultations over its misaligned currency.
• Forbid Overseas Private Investment Corporation (OPIC) financing or insurance for projects in the designated country.
• Oppose new multilateral bank financing for projects in the designated country.
After 360 days of failure to adopt appropriate policies, the administration must:
• Require the U.S. Trade Representative to request dispute settlement consultations in the World Trade Organization with the government responsible for the currency.
• Require the Department of Treasury to consult with the Federal Reserve Board and other central banks to consider remedial intervention in currency markets.
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 Finance and Banking Committees, as well and the House Ways and Means and Financial Services Committees. The members must have demonstrated expertise in finance, economics, or currency exchange.
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