[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H. Con. Res. 301 Introduced in House (IH)]







106th CONGRESS
  2d Session
H. CON. RES. 301

Expressing the sense of the Congress that the United States, in concert 
  with the international community, should enact transaction taxes on 
    short-term, cross-border foreign exchange transactions to deter 
                              speculation.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 11, 2000

Mr. DeFazio (for himself, Mr. Sanders, Mr. Jackson of Illinois, and Ms. 
   Kaptur) submitted the following concurrent resolution; which was 
  referred to the Committee on Banking and Financial Services, and in 
    addition to the Committees on Ways and Means, and International 
 Relations, for a period to be subsequently determined by the Speaker, 
 in each case for consideration of such provisions as fall within the 
                jurisdiction of the committee concerned

_______________________________________________________________________

                         CONCURRENT RESOLUTION


 
Expressing the sense of the Congress that the United States, in concert 
  with the international community, should enact transaction taxes on 
    short-term, cross-border foreign exchange transactions to deter 
                              speculation.

Whereas every day over $1.8 trillion in currency exchanges moves across national 
        borders, a volume far greater than in the last decade;
Whereas such rapid movement of foreign currency has created some additional 
        opportunities for legitimate productive investment, but also has created 
        the potential of triggering national currency collapses and resulting 
        financial crises;
Whereas daily trading in currency markets increased from $0.2 trillion to over 
        $1.8 trillion in just over a decade, from 1986 to 1998; by comparison, 
        the trade in goods and services for all countries for an entire year is 
        only $4.3 trillion; and, therefore, in less than a week, foreign 
        exchange transactions exceed the entire annual volume of world trade in 
        goods and services;
Whereas over 85 percent of these transactions are of a purely speculative nature 
        where investors bet on whether currency values and interest rates will 
        move up or down, and thus bear little or no relationship to the 
        production and trade in goods or services;
Whereas more than 40 percent of all these transactions involve round trips of 
        fewer than 3 days, and over 80 percent of global foreign exchange 
        transactions involve round trips of less than a week;
Whereas the vast majority of transactions take place in relatively few financial 
        centers, particularly the United Kingdom (32 percent), the United States 
        (18 percent), Japan (8 percent), Singapore (7 percent), Germany (5 
        percent), Switzerland (4 percent), Hong Kong (4 percent), and France (4 
        percent);
Whereas these speculative transactions themselves often cause short-term 
        fluctuations of exchange rates, thus provoking more speculation;
Whereas such volume and volatility of liberalized capital flows not only 
        threatens national currency devaluation and financial crises, but 
        disrupts the ability of nations to establish equitable and just economic 
        policies; to intervene to protect their own currencies; and to provide 
        support for needed social and environmental programs;
Whereas in the past, central bank reserves were sufficient to combat any 
        speculation on their country's currency; now, however, financial 
        speculators have created a daily market volume which dwarfs all of the 
        world's central banks combined; and therefore, when a country cannot 
        defend its currency, it effectively loses control of its monetary 
        policy;
Whereas such speculative pressure on a currency results in higher interest rates 
        than is warranted by internal monetary conditions, leading to a lowering 
        of economic growth and an increase in domestic unemployment with the 
        related social problems;
Whereas there is overwhelming evidence that the lack of stability helps to cause 
        financial crises with increasing frequency (1992/93 Europe, 1994 Mexico, 
        1997 Southeast Asia, 1998 Russia, 1999 Brazil), even in countries where 
        basic economic fundamentals are sound, and the market reacts 
        irrationally to rumors (``herd behavior''), causing ``speculative 
        bubbles'' to burst when speculators flee a particular currency;
Whereas such financial crises can have enormous impact worldwide; for example, 
        the Asian currency crisis lowered the world growth projection for 1998 
        by one percent and increased worldwide unemployment by 10 million; and 
        unpredictable exchange rate fluctuations create additional uncertainties 
        for entrepreneurs, making rational planning more difficult;
Whereas such crises have not only economic impact, including exacerbation of 
        global economic inequality, but also social impact including increased 
        unemployment, price increases and disruptions, plant closures, poverty, 
        human rights violations, diversion of resources from sustainable 
        development, and social upheaval, which burden poor, indigenous, and 
        middle-income populations most heavily;
Whereas such impacts in other nations have a spillover effect in the United 
        States and elsewhere by contributing to increased trade imbalances, 
        dumping of low-price products on overburdened markets, and contributing 
        to increased unemployment, volatility in agriculture markets, and 
        stagnant or falling wages;
Whereas de facto support by governments and international institutions of 
        excessive financial speculation may undermine desired macroeconomic 
        policies and contribute to moral hazard and irresponsible market 
        behavior;
Whereas excessive speculation could be curbed by a very small tax of between 0.1 
        percent and 0.25 percent on each cross-border currency transaction (now 
        commonly called ``Tobin-style taxes'', as proposed in 1978 by Nobel 
        prize winning economist James Tobin), or an alternate 2-tiered version 
        (proposed in 1996 by German economist and International Monetary Fund 
        consultant Paul Bernd Spahn);
Whereas such a tax reduces incentives for short-term speculation while remaining 
        small enough to leave longer-term investments intact, with the resulting 
        increased stability of exchange rates serving as a stimulus for 
        productive trade;
Whereas the senior economist of the Federal Reserve Bank of San Francisco has 
        written, ``. . . if your goal is to limit short-term speculation, it is 
        hard to beat the Tobin tax'';
Whereas the revenues from such a tax, projected to be between $50 billion and 
        $300 billion a year, would provide urgently needed resources to combat 
        global and local crises;
Whereas concerns voiced about tax havens and the collection and enforcement of 
        such taxes have been researched by economists, and plans proposed to 
        answer these concerns, such as collection at settlement sites to ensure 
        universality and to track derivative instruments, as proposed by 
        Schmidt; and
Whereas there is already an international movement in support of a transactions 
        tax, including passage of a resolution in the Canadian Parliament, 
        introduction of resolutions in the European Parliament, the French 
        Parliament, and British House of Commons, substantive discussion of the 
        issue in the European Parliament and the parliaments of Switzerland and 
        Germany, plus a chapter in the current Finnish Government rules: Now, 
        therefore, be it
    Resolved by the House of Representatives (the Senate concurring), 
That it is the sense of the Congress that:
            (1) the United States should show leadership by enacting, 
        in concert with the international community, transaction taxes 
        on short-term, cross-border foreign exchange transactions to 
        deter speculation and that the adoption of such Tobin-style 
        taxes should be done in coordination with a large number of 
        nations, in a fully transparent and accountable manner, with 
        the revenue dedicated to urgent global needs;
            (2) the United States should build support for and advocate 
        this position at the World Bank and the International Monetary 
        Fund, as well as within other regional and international 
        organizations, including the Organization for Economic 
        Cooperation and Development, the G-8, and the newly established 
        G-20; and
            (3) this should not be done in isolation of other 
        initiatives for reform of global finance. Instead, the United 
        States should continue to explore other options together with 
        the international community. These options include, but are not 
        limited to tougher transparency rules, tighter reserve 
        requirements, creation of exchange rate ``target zones'' 
        national currency controls, cash requirements for mutual funds, 
        and stronger source-country measures such as disincentives for 
        short-term lending.
                                 <all>