House Approves Currency Reform Bill
The House passed by a vote of 348-79 the Currency Reform for Fair Trade Act (H.R. 2378) that targets China's undervalued currency as a countervailable subsidy. Only five Democrats voted against the legislation, while 99 Republicans voted for it.
Action on legislation in the Senate is possible during a lame-duck session following the November mid-term elections. Sen. Schumer (D-NY) said he would pursue his Currency Exchange Rate Oversight Reform Act of 2010 (S. 3134) during the lame-duck session scheduled following the November elections.
House Ways and Means Committee Chairman Levin (D-MI) believes there will be time in a lame duck session for a conference to resolve differences in the House and Senate passed measures.
Current plans call for the Senate to convene the first part of the lame duck session during the week of Nov. 15. After a break for Thanksgiving, the Senate will return during the week of Nov. 29. No target for adjournment in December has been announced. Senate Finance Committee Chairman Baucus (D-MT) previously has introduced legislation, the Currency Exchange Rate Oversight Reform Act of 2007 (S. 1607), which was approved by the Senate Finance Committee in 2007 by a 20-1 vote, but the measure did not go any further.
The Ways and Means Committee approved a chairman's amendment in the nature of a substitute, which modified the original legislation, introduced by Reps. Ryan (D-OH) and Murphy (R-PA), to be consistent with World Trade Organization (WTO) rules.
The House-passed bill would change the longstanding Commerce Dept. practice of refusing to investigate a subsidy where individuals or groups other than exporters benefitted from the subsidy. The bill also establishes a four-part test to determine if a currency was substantially undervalued, including determinations of whether there are large-scale government interventions in the markets, undervaluation of at least 5%, a significant and persistent global current account surplus, and excessive foreign asset reserves.
Chairman Levin said he and his staff essentially were successful in making H.R. 2738 WTO-compliant. He said there always could be an argument as to whether any measure was compliant with the WTO.
The Obama Administration has not established a position on the currency legislation, other than saying it should be WTO-compliant and effective in addressing problems in the US-China trade relationship. In a visit with an Iowa family, the President said the reason he was pushing China on its currency is because it is undervalued.
The President also directly addressed the currency issue with Chinese Premier Wen Jia Bao at recent United Nations General Assembly meetings.
Chairman Levin said he believed the House bill’s passage would propel further efforts during the Group of 20 leading economies meetings in Seoul, South Korea next month.
Rep. Flake (R-AZ) said that unilateral legislation was unlikely to encourage China to change its exchange rate policy and likely to have the opposite effect of promoting retaliation, noting that China recently had elected to exclude US poultry exports to China. He also said he was not convinced that the bill would create more jobs overall, but merely make goods more expensive for US consumers. He said the legislation was unlikely to make a positive difference to the US-China trade relationship and merely constituted pandering before mid-term elections.
The National Council of Textile Organizations (NCTO) applauded the House’ passage of the newest China currency legislation.
“This historic vote today brings U.S. manufacturers one big step closer to fair competition in the global marketplace and to a strong economic recovery,” NCTO President Cass Johnson stated. “For the first time in a decade, US textile mills are adding jobs and re-opening plants. If China allowed its currency to appreciate to market levels, we believe the textile industry in the United States would add thousands of additional new jobs, build or re-open dozens of plants and revitalize essential export trade with our Western Hemisphere partners. This bill starts our country and our manufacturing industry on the road back. We urge the Senate to make passage of this bill a top priority.”