U.S. Senate Creates Bill to Punish China Over Currency

The legislation would punish currency manipulation as an unfair subsidy and could trigger a set of retaliatory U.S. actions.

Under election-year pressure over trade-driven jobs, U.S. senators unveiled legislation on March 16 that would impose tough new penalties on China if it failed to revalue its currency. The legislation, which enjoys support from both sides of the political aisle, would punish currency manipulation as an unfair subsidy and could trigger a set of retaliatory U.S. action.

The move came as lawmakers in Washington stepped up criticism of China ahead of November mid-term US elections, accusing Beijing of securing an unfair edge in trade by keeping the yuan artificially low. It also follows Chinese Premier Wen Jiabao strong statement at the weekend that Beijing would resist any foreign pressure for a stronger yuan.

"When Premier Wen said that China's currency is not overvalued two days ago, that was the last straw and here we are to tell them we are going to force you to do it -- plain and simple," said Democratic Senator Chuck Schumer as he unveiled the legislation at a news conference.

"There is no bigger step that we can take to promote job creation here in the U.S. than to confront Chinese currency manipulation," said the senator as he referred to the double digit unemployment crisis dogging the United States.

Republican Senator Sam Brownback said he expected a "huge vote," both in the House of Representatives and the Senate, on the legislation.

This will enable President Barack Obama's administration "to do what it needs to do," Brownback said.

On March 15, a group of 130 Democratic and Republican lawmakers called on U.S. Treasury Secretary Timothy Geithner to brand China a currency manipulator in a report due next month, saying Beijing was in effect subsidizing exports. "The impact of China's currency manipulation on the U.S .economy cannot be overstated," the lawmakers said in the letter submitted to Geithner and U.S. Commerce Secretary Gary Locke.

President Obama last week renewed his call to China to embrace a "market oriented" exchange rate, upping U.S. pressure on the yuan currency at a time of turmoil in Washington's delicate relations with Beijing.

The legislation proposed would require the U.S. Treasury Department to identify countries with "fundamentally misaligned currencies" and a second "priority action" list of such countries that pursue such imbalances as policy. Countries on the "priority" list would face a range of U.S. responses, including a possible change in whether such nations get "market economy" designation for the purposes of U.S. anti-dumping laws.

U.S. policy would be required to reflect currency undervaluation in dumping calculations for products made in the designated country, and forbid the U.S. government from buying goods or services from such a country unless it is a member of the WTO Government Procurement Agreement. The measure would target projects in a designated country, including forbidding overseas private financing or insurance and opposing new multilateral bank financing, if the country fails to adopt "appropriate policies," according to a summary of the legislation.

Washington would also ask the International Monetary Fund to engage designated countries in special talks on their currency under the plan. The measure would also require the top U.S. trade official to request dispute settlement consultations in the World Trade Organization with the government responsible for the currency. And it would call on the Department of Treasury to consult with the Federal Reserve Board and other central banks to consider remedial intervention in currency markets.

Copyright Agence France-Presse, 2010

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish