April 7, 2005
Washington, D.C. April 7, 2005 – Members of Congress today took much-needed action on China’s biased monetary policy with the introduction of a bill that brings relief to U.S. manufacturers faced with competing against injurious imports subsidized by China’s undervalued currency, according to a U.S. coalition that was formed last year to draw attention to the issue.
If signed into law, the Chinese Currency Act of 2005 would hold China accountable for the serious adverse impact that its exchange-rate manipulation and resultant currency undervaluation have on imports into the United States from China. The bill notes that China’s decade-long policy of undervaluing its currency is contrary to China’s international legal obligations at the World Trade Organization (WTO) and the International Monetary Fund (IMF) not to engage in prohibited export subsidization or currency manipulation to gain an unfair competitive advantage in international trade.
The China Currency Coalition thanked Congressmen Tim Ryan (D-OH) and Duncan Hunter (R-CA) for taking the lead in introducing this legislation. Said Skip Hartquist, counsel to the Coalition, "If this bill is enacted, it will provide U.S. industries with the option of pursuing relief against subsidized, injurious imports from China under either or both the countervailing duty law and the China-specific market-disruption statute. These alternatives address quickly and effectively the harm to U.S. manufacturers caused or threatened by China’s exchange-rate manipulation and do so in a manner consistent with the international legal rights of the United States at the WTO and IMF."
Between 1992 and 1994, the Treasury Department made affirmative determinations of currency manipulation by China, but since then has not, even though the situation for the United States and the global community has deteriorated severely. "The seriousness and urgency of this problem," continued Hartquist, "cannot be understated. It is difficult to understand how the Treasury Department has not found currency manipulation by China in the last several years despite the fact that during this time China’s bilateral trade surplus with the United States, China’s global trade surplus, and China’s foreign exchange reserves have far surpassed the levels that existed in the early 1990s."
The bill confirms that a government’s undervaluation of its currency through exchange-rate manipulation is a prohibited export subsidy under the WTO’s relevant agreements. The bill also provides guidelines for the U.S. Department of Commerce to determine if manipulation is occurring and, if so, the amount of the countervailable benefit. In defining "exchange-rate manipulation," the legislative language tracks and reflects the IMF’s working definition.
The bill sets forth essentially the same guidelines for the International Trade Commission (ITC), a quasi-judicial governmental body with jurisdiction over whether a U.S. industry is harmed or threatened by imports. In this instance, the ITC would determine whether increased imports from China that benefit from exchange-rate manipulation disrupt the U.S. market and injure or threaten a domestic industry.
Additionally, the legislation directs the Secretary of Defense in the context of a market- disruption investigation to advise the ITC when the imports from China compete with American-made products that are critical to the defense industrial base of the United States. If the ITC makes an affirmative determination of market disruption, and if the Secretary of Defense concludes that the U.S.-made products that are like the imports from China are critical to the U.S. defense industrial base, then the Secretary of Defense is prohibited from procuring the Chinese product unless the President decides that there is a compelling reason to waive that prohibition.
The China Currency Coalition is an alliance of industry, agriculture, and worker organizations whose mission is to support U.S. manufacturing by seeking an end to Chinese currency manipulation. Coalition counsel David A. Hartquist is an international trade attorney with Kelley Drye. For further information, visit www.chinacurrencycoalition.org.
The IMF is an organization of 184 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.
The WTO is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.