Industry News

China Currency Bill Passes Senate, Faces Opposition from House

October 12, 2011


On October 11, 2011, the Senate passed S. 1619, the Currency Exchange Rate Oversight Reform Act, by a vote of 63-35. This bill aims to reduce the impact of foreign currency manipulation by altering actions taken by the Department of Commerce and the U.S. Treasury. The measure clarifies that countervailing duty law can address currency undervaluation. In particular, the bill specifies that the Commerce Department may not refuse to investigate a subsidy allegation based on the single fact that a subsidy is available in circumstances in addition to export. It further requires the Department of Commerce to investigate whether currency undervaluation by a government provides a countervailable subsidy when a U.S. industry provides proper documentation and requests an investigation. S. 1619 additionally provides new criteria for identifying misaligned currencies and requires the U.S. Treasury to develop a biannual report to Congress identifying “fundamentally misaligned currencies” and “fundamentally misaligned currencies for priority action.” Designation as a “priority action” currency would trigger consequences for nations issuing such currencies, including the U.S. opposing any IMF governance changes benefiting these countries, and consideration of the countries’ currency status when determining whether to grant a country “market economy” status under antidumping law. Although the bill does not specifically mention China, it clearly targets Chinese currency exchange policies.

In order to become law, the bill would have to pass in the House before being sent to the President’s desk. The legislation faces an uphill battle in the House, where Speaker of the House John Boehner (R-OH) has called it “dangerous” and signaled that the House may not even take up the bill for a vote. China’s Vice Foreign Minister Cui Tiankai has stated that should the bill become law, it would result in a trade war between the United States and China. President Obama has also voiced concerns over whether the law is in compliance with World Trade Organization regulations.

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