1.
This Act may be cited as the
Fair Currency Enforcement Act of
2005
.
2.
Congress makes the following
findings:
(1)
The manufacturing sector is
an important driver of the United States economy, contributing almost 30
percent of our economic growth during the 1990’s, and twice the productivity
growth of the service sector during that period.
(2)
The manufacturing sector
contributes significantly to our Nation’s development of new products and
technologies for world markets, performing almost 60 percent of all research
and development in the United States over the past two decades.
(3)
The manufacturing sector
provides high quality jobs, with average weekly wages between 20 and 30 percent
higher than jobs in the service sector.
(4)
The manufacturing growth
creates a significant number of jobs and investments in other sectors of the
economy, and this multiplier effect
is reckoned by economists to
be larger (2.43 to 1) than for any other significant sector of the
economy.
(5)
The jobless
recovery
from the recent recession has witnessed the worst job slump
since the Great Depression and the weakest employment recovery on
record.
(6)
The manufacturing sector has
been hit the hardest by the jobless recovery.
(7)
A significant factor in the
loss of valuable United States manufacturing jobs is the difficulty faced by
United States manufacturers in competing effectively against lower priced
foreign products.
(8)
A significant obstacle to
United States manufacturers in competing against foreign manufacturers is the
practice of some governments of intervening aggressively in currency markets,
or pegging their currencies at fixed rates, to maintain their own currencies at
artificially low valuations, thus subsidizing their export sales and raising
price barriers to imports from the United States.
(9)
Certain Asian countries
exemplify this practice. China, Japan, South Korea, and Taiwan together have
accumulated approximately 1/2 of the world’s total
currency reserves. The vast majority of these reserves, perhaps as high as 90
percent, are in dollars. These same 4 countries account for 60 percent of the
United States world trade deficit in manufactured goods. These reserves are
symptomatic of a strategy of intervention to manipulate currency values.
(10)
The People’s Republic of
China is particularly aggressive in intervening to maintain the value of its
currency, the renminbi, at an artificially low rate. China maintains this rate
by mandating foreign exchange sales at its central bank at a fixed exchange
rate against the dollar, in effect, pegging the renminbi at this rate. This low
rate represents a significant reason why China has contributed the most to our
trade deficit in manufactured goods.
(11)
Economists estimate that as a
result of this manipulation of the Chinese currency, the renminbi is
undervalued by between 15 and 40 percent, effectively creating a 15- to
40-percent subsidy for Chinese exports and giving Chinese manufacturers a
significant price advantage over United States and other competitors.
(12)
The national currency of
Japan is the yen. Experts estimate that the yen is undervalued by approximately
20 percent or more, giving Japanese manufacturers a significant price advantage
over United States competitors.
(13)
In addition to being placed
at a competitive disadvantage by foreign competitors’ exports that are unfairly
subsidized by strategically undervalued currencies, United States manufacturers
also may face significant nontariff barriers to their own exports to these same
countries. For example, in the past in China, until remediated, a complex
system involving that nation’s value added tax and special tax rebates ensured
that semiconductor devices imported into China were taxed at 17 percent while
domestic devices are effectively taxed at 6 percent.
(14)
The United States has the
right and power to redress unfair competitive practices in international trade
involving currency manipulation.
(15)
Under
section
3004 of the Omnibus Trade and
Competitiveness Act of 1988, the Secretary of the Treasury is
required to determine whether any country is manipulating the rate of exchange
between its currency and the dollar for the purpose of preventing effective
balance of payments adjustments or gaining unfair advantage in international
trade. If such violations are found, the Secretary of the Treasury is required
to undertake negotiations with any country that has a significant trade
surplus.
(16)
Article IV of the Articles of
Agreement of the International Monetary Fund prohibits currency manipulation by
a member for the purposes of gaining an unfair competitive advantage over other
members, and the related surveillance provision defines
manipulation
to include protracted large-scale
intervention in one direction in the exchange market
.
(17)
Under Article XV of the
Exchange Agreements of the General Agreement on Tariffs and Trade, all
contracting parties shall not, by exchange action, frustrate the intent
of the provisions of this Agreement, nor by trade action, the intent of the
Articles of Agreement of the International Monetary Fund
. Such actions
are actionable violations. The intent of the General Agreement on Tariffs and
Trade Exchange Agreement, as stated in the preamble of that Agreement, includes
the objective of entering into reciprocal and mutually advantageous
arrangements directed to substantial reduction of tariffs and other barriers to
trade,
and currency manipulation may constitute a trade barrier
disruptive to reciprocal and mutually advantageous trade arrangements.
(18)
Deliberate currency
manipulation by nations to significantly undervalue their currencies also may
be interpreted as a violation of the Agreement on Subsidies and Countervailing
Measures of the World Trade Organization (as described in section 101(d)(12))
of the Uruguay Round Agreements Act, which could lead to action and remedy
under the World Trade Organization dispute settlement procedures.
(19)
Deliberate, large-scale
intervention by governments in currency markets to significantly undervalue
their currencies may be a nullification and impairment of trade benefits
precluded under Article XXIII of the General Agreement on Tariffs and Trade,
and subject to remedy.
(20)
The United States Trade
Representative also has authority to pursue remedial actions under
section
301 of the Trade Act of
1974.
(21)
The United States has special
rights to take action to redress market disruption under
section
406 of the Trade Act of
1974 adopted pursuant to the provisions of the United States-China
Bilateral Agreement on World Trade Organization Accession.
(22)
While large-scale
manipulation of currencies by certain major trading partners to achieve an
unfair competitive advantage is one of the most pervasive barriers faced by the
manufacturing sector in the United States, other factors are contributing to
the decline of manufacturing and small and mid-sized manufacturing firms in the
United States, including but not limited to non-tariff trade barriers, lax
enforcement of existing trade agreements, and weak or underutilized government
support for trade promotion.
3.
Negotiation period regarding currency negotiations
Beginning on the date of
enactment of this Act, the President shall begin bilateral and multilateral
negotiations for a 90-day period with those governments of nations determined
to be engaged most egregiously in currency manipulation, as defined in section
7, to seek a prompt and orderly end to such currency manipulation and to ensure
that the currencies of these countries are freely traded on international
currency markets, or are established at a level that reflects a more
appropriate and accurate market value. The President shall seek support in this
process from international agencies and other nations and regions adversely
affected by these currency practices.
4.
Findings of fact and report regarding currency
manipulation
(a)
During the 90-day negotiation
period described in section 3, the International Trade Commission shall—
(1)
ascertain and develop the
full facts and details concerning how countries have acted to manipulate their
currencies to increase their exports to the United States and limit their
imports of United States products;
(2)
quantify the extent of this
currency manipulation;
(3)
examine in detail how these
currency practices have affected and will continue to affect United States
manufacturers and United States trade levels, both for imports and
exports;
(4)
review whether and to what
extent reduction of currency manipulation and the accumulation of
dollar-denominated currency reserves and public debt instruments might
adversely affect United States interest rates and public debt financing;
(5)
make a determination of any
and all available mechanisms for redress under applicable international trade
treaties and agreements, including the Articles of Agreement of the
International Monetary Fund, the General Agreement on Tariffs and Trade, the
World Trade Organization Agreements, and United States trade laws; and
(6)
undertake other appropriate
evaluations of the issues described in paragraphs (1) through (5).
(b)
Not later than 90 days after
the date of enactment of this Act, the International Trade Commission shall
provide a detailed report to the President, the United States Trade
Representative, the Secretary of the Treasury, and the appropriate
congressional committees on the findings made as a result of the reviews
undertaken under paragraphs (1) through (6) of subsection (a).
5.
Institute proceedings regarding currency manipulation
At the end of the 90-day
negotiation period provided for in section 3, if agreements are not reached by
the President to promptly end currency manipulation, the President shall
institute proceedings under the relevant provisions of international law and
United States trade laws including sections 301 and 406 of the
Trade Act of 1974 with respect to
those countries that, based on the findings of the International Trade
Commission under section 4, continue to engage in the most egregious currency
manipulation. In addition to seeking a prompt end to currency manipulation, the
President shall seek appropriate damages and remedies for the Nation’s
manufacturers and other affected parties. If the President does not institute
action, the President shall, not later than 120 days after the date of
enactment of this Act, provide to the appropriate congressional committees a
detailed explanation and accounting of precisely why the President has
determined not to institute action.
6.
Additional reports and recommendations
(a)
Within 90 days of the date of
enactment of this Act, the Secretary of Defense shall provide a detailed report
to the appropriate congressional committees evaluating the effects on our
national security of countries engaging in significant currency manipulations,
and the effect of such manipulation on critical manufacturing sectors.
(b)
Other unfair trade practices
Within 90 days of the date of
enactment of this Act, the United States Trade Representative and the
International Trade Commission shall evaluate and report in detail to the
appropriate congressional committees on other trade practices and trade
barriers by major East Asian trading nations potentially in violation of
international trade agreements, including the practice of maintaining a
value-added or other tax regime that effectively discriminates against imports
by underpricing domestically produced goods, or setting technology standards
that effectively limit imports.
(c)
Within 90 days of the date of
enactment of this Act, the United States Trade Representative and the
International Trade Commission shall report in detail to the appropriate
congressional committees on steps that could be taken to significantly improve
trade enforcement efforts against unfair trade practices by competitor trading
nations, including making recommendations for additional support for trade
enforcement efforts.
(d)
Within 90 days of the date of
enactment of this Act, the Secretaries of State and Commerce, and the United
States Trade Representative, shall prepare a detailed report with
recommendations on steps that could be undertaken to significantly improve
trade promotion for United States goods and services, including recommendations
on additional support to improve trade promotion.
7.
Currency manipulation defined
In this Act, the term
currency manipulation
means—
(1)
large-scale manipulation of
exchange rates by a nation in order to gain an unfair competitive advantage as
stated in Article IV of the Articles of Agreement of the International Monetary
Fund and related surveillance provisions;
(2)
sustained, large-scale
currency intervention in one direction, through mandatory foreign exchange
sales at a nation’s central bank at a fixed exchange rate; or
(3)
other mechanisms, used to
maintain a currency at a fixed exchange rate relative to another
currency.