Ahead of President Obama’s meeting China’s President Xi Jinping later this week, and with our trade deficit with China up yet again, eight Senators from both parties joined today to introduce The Currency Exchange Rate Oversight Act of 2013. The eight are U.S. Senators Sherrod Brown (D-OH), Jeff Sessions (R-AL), Charles Schumer (D-NY), Lindsey Graham (R-SC), Richard Burr (R-NC), Debbie Stabenow (D-MI), Susan Collins (R-ME), and Robert Casey (D-PA). A similar bill overwhelmingly passed the Senate in 2011, but Speaker Boehner refused to allow it to come to a vote, despite the bill having more than 60 House Republican co-sponsors.
China and other countries manipulate their currencies, giving themselves a trade advantage. The manipulation causes products made in their countries to be priced lower in international markets, even before “dumping,” national subsidies and other trade violations come into play. This is one reason (along with tax-haven tax “deferral”) that millions of US jobs, more than 50,000 factories, even entire industries have left the US and moved to China. It is also one of the reasons we have a trade deficit with China that drains an amount approaching a billion dollars per day from our economy.
The Omnibus Trade and Competitiveness Act of 1988 requires the Treasury Department to declare countries like China to be currency manipulators. But instead, the department has repeatedly issued reports saying that while the currency “remains undervalued” and sometimes uses the word “significantly” they, like the Bush administration before them, refuse to make the formal declaration. A formal declaration that a country manipulates its currency opens up a process that can lead to “countervailing” tariffs on imports from that country. The law also requires the administration to open investigations into countries that have trade imbalances with us of more than 10% and take steps to repair the damage, but the administration refuses to comply with that section of the law as well.
The Brown (and the rest) bill will require the Treasury Department to identify misaligned currencies and requires action by the administration if countries fail to correct the misalignment. The bill outlines a series of steps the administration must take, beginning with consultation with the offending country. After 90 days, if the situation is not remedied the bill requires the administraton to pursue “dumping” remedies on goods from that country, forbids the administation from federal procurement from that country, forbids government financing for projects in that country, and then after 360 days to pursue a trade case with the WTO and even begin steps to directly intervene in currency markets.
According to the Brown press release on this bill, December 2012 report by the Peterson Institute for International Economics concluded that currency manipulation by foreign governments had cost the U.S. from 1 million to 5 million jobs and increased the U.S. trade deficit by $200 billion to $500 billion per year.
The press release also says that the Economic Policy Institute (EPI) estimates that ending currency manipulation in the United States would increase U.S. net goods exports by between $184.1 billion and $387.5 billion; increase U.S. gross domestic product (GDP) by between $225.02 billion and $473.68 billion; and increase total American salaries by between $112.99 billion and $237.84 billion. EPI also found that addressing currency manipulation could support the creation of 2.25 million American jobs.
The Alliance for American Manufacturing’s blog raises these key points supporting the bill:
- As AAM’s national polling demonstrates, 62% of voters, including 68% of Republican voters, favor tough action on China’s predatory trade practices and repeated violations of trade agreements.
- In an editorial published this week at Real Clear Politics, Paul urged action on China’s currency, which he says is clearly pegged to political pressure.
- AAM has produced a fact sheet demonstrating how the Yuan has appreciated each time Washington moves to take action.
- In 2012, the U.S. trade deficit with China reached a new record of $315 billion. This trade deficit has cost 2.7 million U.S. jobs between 2001-2011, according to a recent study by the Economic Policy Institute (EPI).
Click to read a summary of The Brown-Sessions-Schumer-Burr-Stabenow-Collins Currency Exchange Rate Oversight Act of 2013