Second Senate Committee Acts On China Currency Issue

By James A. Morrissey, Washington Correspondent

The Senate Banking Committee has joined the Finance Committee in approving legislation to address the China currency under-valuation issue. The Banking Committee’s bill takes a different tack than the one approved by the Finance Committee on July 27, but the two bills are expected to be combined eventually in some form for consideration by the full Senate. The Bush administration has expressed its strong opposition to both bills, saying that “direct, robust discussions” with senior Chinese officials are better than trying to correct the problem through legislation. Importers of textiles and apparel also have expressed their strong opposition to the legislation.

The Banking Committee’s bill requires the Department of the Treasury to define currency manipulation and identify countries that have major trade surpluses with the United States. It requires Treasury to engage in bilateral and multilateral negotiations with countries named as currency manipulators and calls for immediate International Monetary Fund consultations. It also gives Treasury authority to file a complaint with the World Trade Organization (WTO). It creates a process by which Congress can originate a joint resolution of disapproval when Treasury fails to cite manipulation.

The Finance Committee’s bill also provides for defining currency manipulation and filing cases with the WTO, but it goes further and would permit the United States to use currency manipulation as a factor in anti-dumping cases.

Currency manipulation legislation also is pending in the House, but there has not been any committee action. The Hunter-Ryan bill, which is strongly supported by US textile manufacturers, and equally strongly opposed by importers, would define currency manipulation as a prohibited export subsidy that could be subject to US countervailing duties.

In testimony before the House Ways and Means Committee last week, representatives from the American Manufacturing Trade Action Coalition said the Hunter-Ryan bill will provide injured US companies with “key enforcement tools” to fight back against countries that enjoy an unfair trade advantage because of their currencies. Appearing at the same hearing, Treasury Deputy Secretary Mark Sobel reiterated the administration’s position that consultations with China are the best way to go.