Will Congress Get Tough on China's Currency Manipulation?


Extrait de: Will Congress Get Tough on China's Currency Manipulation?, Robert Oak, The Economist Populist, 10/03/2011

For the most part it seems the Senate likes to blow smoke when there is little fire to take action. Will this time be different?

Today the Senate voted 79 to 19 to allow Bill S. 1619: Currency Exchange Rate Oversight Reform Act of 2011, to proceed for amendments and a floor vote. The bill is a long overdue measure to provide for identification of misaligned currency. The bill provides a mechanism to require corrective action by the offending currency manipulator nation to correct the currency peg misalignment or face anti-dumping type tariffs. Reuters has a plain English summary of what the bill does. Beyond this cloture vote, the question becomes, will the Senate really do something and pass something to take on China and their flagrant undervaluing of their currency?

Uncle Sam should no longer be Uncle Sucker

The Alliance for American Manufacturing said the above in calling for passage of this bill. America should not be China's export dumping ground. We hear pundits, seemingly statistically disabled, proclaiming the bill will start a trade war. These pundit du jours must have been asleep for the last 11 years. We've already had a neutron bomb exploded upon us by China in trade and we've lost, big time. We didn't have a trade war, we had a trade surrender. Giving multinational corporations and correspondingly China whatever they want, is precisely U.S. policy currently, no matter what it costs Americans economically.

The United States has lost millions of jobs to China and their unfair trade practices makes all of America see red. America to date has had trade policy written by and for multinational corporations.

2.4 million jobs were lost to China before the recession. The United States also loses billions to China in intellectual property theft.

It's so bad the trade deficit with China is on track to break last year's record and even Wall Street gets it that China and the trade deficit are huge problems. The Renminbi is said to be 28% to 40% undervalued.

The bill has blockage in the corporate controlled House of Representatives. The multinational corporation lobby is on high alert, trying to block any action in favor of the U.S. middle class. Seems multinationals are hell bent on offshore outsourcing American jobs, the U.S. manufacturing sector, plus make sure we increase the trade deficit. Like sentinels, lobbyists can be spotted in every corner of those long Congressional marbled halls.

Both the White House and just say no Eric Cantor are being mum on the bill. The code of silence isn't a corporate donor demand, but instead the typical corporate talking points political mouthing spew has been muted by the people's populist rage and anger.

Most Economists who can add praise the bill, including Paul Krugman:

Ask yourself: Why is it so hard to restore full employment? It’s true that the housing bubble has popped, and consumers are saving more than they did a few years ago. But once upon a time America was able to achieve full employment without a housing bubble and with savings rates even higher than we have now. What changed?

The answer is that we used to run much smaller trade deficits. A return to economic health would look much more achievable if we weren’t spending $500 billion more each year on imported goods and services than foreigners spent on our exports.

The bill enables U.S. businesses request tariffs or duties on Chinese imports that directly correlate to China's undervaluation of the Yuan. Bloomberg:

The bill would require the Treasury Department to produce a report twice each year identifying currencies that are significantly undervalued.

Governments that are undervaluing their currencies and don’t take corrective action would face penalties including increased dumping duties, a ban on federal procurement in the U.S. and ineligibility to receive financing form the Overseas Private Investment Corporation.

The bill simply makes it easier to slap a tariff on China, but for some goods.

If you want to ask your Congressional representatives to pass this bill, click here. It is expected to pass the Senate.


Extrait de: FACTBOX-Details of Senate China currency bill, Reuters, by Doug Palmer in Washington; Editing by Sandra Maler, Jan 17, 2011

Jan 17 (Reuters) - A group of senators said on Monday they would push for approval of a bipartisan bill pressing China to more quickly raise the value of its currency.

The announcement, which came on the eve of Chinese President Hu Jintao's state visit to Washington, showed China's currency practices remain a potent issue in Congress.

But both the Senate and the House of Representatives would have to approve the bill, and President Barack Obama would have to sign it, for it to become law.

Supporters claim wide support for the measure, but previous efforts to pass currency legislation directed at China have failed because of concerns it could trigger retaliation by Beijing, which is the biggest foreign holder of U.S. government debt.

Following are details of current U.S. law and the proposed Currency Exchange Rate Oversight Reform Act of 2011:

CURRENT LAW

·         The U.S. Treasury Department, in consultation with the International Monetary Fund, shall analyze the exchange rate policies of foreign countries on an annual basis.

·         Semiannual reports are due April 15 and Oct. 15, although the reports are often delayed for political reasons as has been the case with the most recent report.

·         The reports examine whether countries are manipulating their currency's exchange rate with the U.S. dollar "for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade."

·         If manipulation is found, the Treasury secretary shall "initiate negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar."

·         The secretary "shall not be required to initiate negotiations in cases where such negotiations would have a serious detrimental impact on vital national economic and security interests."

SENATE PROPOSAL

·         Treasury under the Currency Exchange Rate Oversight Reform Act of 2011 would be required to drop its "manipulation" criteria in favor of determining whether a currency is "fundamentally misaligned" based on objective criteria or clear policy action from the relevant government.

·         The latter designation would trigger a priority investigation from the U.S. Commerce Department as to whether the undervaluation is an unfair subsidy for that country's exports at the expense of U.S. industry. It must then impose import duties to counteract the subsidy.

·         Treasury would be required to immediately consult with all countries with misaligned currencies and engage the International Monetary Fund in priority cases.

·         After 90 days of the designated country's failure to make appropriate policies, the U.S. must incorporate the currency undervaluation into its dumping calculations for products from that country.

·         Federal purchases of goods and services from the country would be prohibited unless the country is a member of the World Trade Organization's Government Procurement Agreement -- a provision aimed squarely at China.

·         After 360 days of failure to adopt appropriate policies, the U.S. Trade Representative must request WTO dispute settlement consultations with the designated country.

·         The U.S. Treasury also would be required to consult with the Federal Reserve and other central banks to consider remedial intervention in currency markets.

·         The U.S. president could put the process on hold after the initial 90 days of inaction if he determined that it would harm national security or the economic interests of the United States, but this must be explained and could be overridden by a congressional disapproval resolution.

·         The bill would create a new body that the Treasury must consult while developing its report. Eight of the nine members would be chosen by Congress.