[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1607 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 1607

To provide for identification of misaligned currency, require action to 
           correct the misalignment, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 13, 2007

  Mr. Baucus (for himself, Mr. Grassley, Mr. Schumer, and Mr. Graham) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To provide for identification of misaligned currency, require action to 
           correct the misalignment, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Currency Exchange Rate Oversight 
Reform Act of 2007''.

            TITLE I--CURRENCY EXCHANGE RATE OVERSIGHT REFORM

SEC. 111. DEFINITIONS.

    In this Act:
            (1) Administering authority.--The term ``administering 
        authority'' means the authority referred to in section 771(1) 
        of the Tariff Act of 1930 (19 U.S.C. 1677(1)).
            (2) Agreement on government procurement.--The term 
        ``Agreement on Government Procurement'' means the agreement 
        referred to in section 101(d)(17) of the Uruguay Round 
        Agreements Act (19 U.S.C. 3511(d)(17)).
            (3) Country.--The term ``country'' means a foreign country, 
        dependent territory, or possession of a foreign country, and 
        may include an association of 2 or more foreign countries, 
        dependent territories, or possessions of countries into a 
        customs union outside the United States.
            (4) Exporting country.--The term ``exporting country'' 
        means the country in which the subject merchandise is produced 
        or manufactured.
            (5) Fundamental misalignment.--The term ``fundamental 
        misalignment'' means a significant and prolonged undervaluation 
        of the prevailing real exchange rate between the United States 
        dollar and a foreign currency from its medium-term equilibrium 
        level.
            (6) Fundamentally misaligned currency.--The term 
        ``fundamentally misaligned currency'' means a foreign currency 
        that is in fundamental misalignment.
            (7) Real exchange rate.--The term ``real exchange rate'' 
        means a nominal exchange rate, expressed in price-adjusted 
        terms.
            (8) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (9) Subject merchandise.--The term ``subject merchandise'' 
        means the merchandise subject to an antidumping investigation, 
        review, suspension agreement, or order referred to in section 
        771(25) of the Tariff Act of 1930 (19 U.S.C. 1677(25)).
            (10) WTO agreement.--The term ``WTO Agreement'' means the 
        agreement referred to in section 2(9) of the Uruguay Round 
        Agreements Act (19 U.S.C. 3501(9)).

SEC. 112. REPORT ON INTERNATIONAL MONETARY POLICY AND CURRENCY EXCHANGE 
              RATES.

    (a) Reports Required.--
            (1) In general.--Not later than March 15 and September 15 
        of each calendar year, the Secretary, after consulting with the 
        Chairman of the Board of Governors of the Federal Reserve 
        System and the Advisory Committee on International Exchange 
        Rate Policy, shall submit to Congress, a written report on 
        international monetary policy and currency exchange rates.
            (2) Consultations.--On or before March 30 and September 30 
        of each year, the Secretary shall appear, if requested, before 
        the Committee on Banking, Housing, and Urban Affairs of the 
        Senate and the Committee on Financial Services of the House of 
        Representatives to provide testimony on the reports submitted 
        pursuant to paragraph (1).
    (b) Content of Reports.--Each report submitted under subsection (a) 
shall contain--
            (1) an analysis of currency market developments and the 
        relationship between the United States dollar and the 
        currencies of major economies and trading partners of the 
        United States;
            (2) a review of the economic and monetary policies of major 
        economies and trading partners of the United States, and an 
        evaluation of how such policies impact currency exchange rates;
            (3) a description of any currency intervention by the 
        United States or other major economies or trading partners of 
        the United States, or other actions undertaken to adjust the 
        actual exchange rate relative to the United States dollar;
            (4) an evaluation of the domestic and global factors that 
        underlie the conditions in the currency markets, including--
                    (A) monetary and financial conditions;
                    (B) accumulation of foreign assets;
                    (C) macroeconomic trends;
                    (D) trends in current and financial account 
                balances;
                    (E) the size, composition, and growth of 
                international capital flows;
                    (F) the impact of the external sector on economic 
                growth;
                    (G) the size and growth of external indebtedness;
                    (H) trends in the net level of international 
                investment; and
                    (I) capital controls, trade, and exchange 
                restrictions;
            (5) a list of currencies designated as fundamentally 
        misaligned currencies pursuant to section 113(a)(2), and a 
        description of any economic models or methodologies used to 
        establish the list;
            (6) a list of currencies designated for priority action 
        pursuant to section 113(a)(3);
            (7) an identification of the nominal value associated with 
        the medium-term equilibrium exchange rate, relative to the 
        United States dollar, for each currency listed under paragraph 
        (6);
            (8) a description of any consultations conducted or other 
        steps taken pursuant to section 114, 115, or 116; and
            (9) a description of any determination made pursuant to 
        section 118(a).
    (c) Consultations.--The Secretary shall consult with the Chairman 
of the Board of Governors of the Federal Reserve System and the 
Advisory Committee on International Exchange Rate Policy with respect 
to the preparation of each report required under subsection (a). Any 
comments provided by the Chairman of the Board of Governors of the 
Federal Reserve System or the Advisory Committee on International 
Exchange Rate Policy shall be submitted to the Secretary not later than 
the date that is 15 days before the date each report is due under 
subsection (a). The Secretary shall submit the report to Congress after 
taking into account all such comments received.

SEC. 113. IDENTIFICATION OF FUNDAMENTALLY MISALIGNED CURRENCIES.

    (a) Identification.--
            (1) In general.--The Secretary shall analyze on a 
        semiannual basis the prevailing real exchange rates between the 
        United States dollar and foreign currencies.
            (2) Designation of fundamentally misaligned currencies.--As 
        a result of the analysis conducted under paragraph (1), the 
        Secretary shall identify any foreign currency that is in 
        fundamental misalignment and shall designate such currency as a 
        fundamentally misaligned currency.
            (3) Designation of currencies for priority action.--The 
        Secretary shall designate a currency identified under paragraph 
        (2) for priority action if the country that issues such 
        currency is--
                    (A) engaging in protracted large-scale intervention 
                in one direction in the currency exchange market;
                    (B) engaging in excessive reserve accumulation;
                    (C) introducing or substantially modifying for 
                balance of payments purposes a restriction on, or 
                incentive for, the inflow or outflow of capital, that 
                is inconsistent with the goal of achieving full 
                currency convertibility; or
                    (D) pursuing any other policy or action that, in 
                the view of the Secretary, warrants designation for 
                priority action.
    (b) Reports.--The Secretary shall include a list of any foreign 
currency designated under paragraph (2) or (3) of subsection (a) in 
each report required by section 112.

SEC. 114. NEGOTIATIONS AND CONSULTATIONS.

    (a) In General.--Upon designation of a currency pursuant to section 
113(a)(2), the Secretary shall seek bilateral consultations with the 
country that issues such currency in order to facilitate the adoption 
of appropriate policies to address the fundamental misalignment.
    (b) Consultations Involving Currencies Designated for Priority 
Action.--With respect to each currency designated for priority action 
pursuant to section 113(a)(3), the Secretary shall, in addition to the 
consultations with the country described in subsection (a)--
            (1) seek the advice of the International Monetary Fund with 
        respect to the Secretary's findings in the report submitted to 
        Congress pursuant to section 112(a); and
            (2) encourage other governments, whether bilaterally or in 
        appropriate multinational fora, to join the United States in 
        seeking the adoption of appropriate policies by the country 
        described in subsection (a) to eliminate the fundamental 
        misalignment.

SEC. 115. FAILURE TO ADOPT APPROPRIATE POLICIES.

    (a) In General.--Not later than 180 days after the date on which a 
currency is designated for priority action pursuant to section 
113(a)(3), the Secretary shall determine whether the country that 
issues such currency has adopted appropriate policies to eliminate the 
fundamental misalignment. The Secretary shall promptly notify Congress 
of such determination and publish notice of the determination in the 
Federal Register. If the Secretary determines that the country that 
issues such currency has failed to adopt appropriate policies to 
eliminate the fundamental misalignment, the following shall apply with 
respect to the country until a notification described in section 116(b) 
is published in the Federal Register:
            (1) Adjustment under antidumping law.--For purposes of an 
        antidumping investigation or review under title VII of the 
        Tariff Act of 1930 (19 U.S.C. 1673 et seq.) the following shall 
        apply:
                    (A) In general.--The administering authority shall 
                ensure a fair comparison between the export price and 
                the normal value by adjusting the price used to 
                establish export price or constructed export price to 
                reflect the fundamental misalignment of the currency of 
                the exporting country.
                    (B) Sales subject to adjustment.--The adjustment 
                described in subparagraph (A) shall apply with respect 
                to subject merchandise sold on or after the date that 
                is 30 days after the date the currency of the exporting 
                country is designated for priority action pursuant to 
                section 113(a)(3).
            (2) Federal procurement.--
                    (A) In general.--The President shall prohibit the 
                procurement by the Federal Government of products or 
                services from the country.
                    (B) Exception.--The prohibition provided for in 
                subparagraph (A) shall not apply with respect to a 
                country that is a party to the Agreement on Government 
                Procurement.
            (3) Request for imf action.--The United States shall inform 
        the Managing Director of the International Monetary Fund of the 
        failure of the country to adopt appropriate policies to 
        eliminate the fundamental misalignment, and the actions the 
        country is engaging in that are identified in section 
        113(a)(3), and shall request that the Managing Director of the 
        International Monetary Fund--
                    (A) consult with such country regarding the 
                observance of the country's obligations under article 
                IV of the International Monetary Fund Articles of 
                Agreement, including through special consultations, if 
                necessary; and
                    (B) formally report the results of such 
                consultations to the Executive Board of the 
                International Monetary Fund within 180 days of the date 
                of such request.
            (4) OPIC financing.--The Overseas Private Investment 
        Corporation shall not approve any new financing (including 
        insurance, reinsurance, or guarantee) with respect to a project 
        located within the country.
            (5) Multilateral bank financing.--The Secretary shall 
        instruct the United States Executive Director at each 
        multilateral bank to oppose the approval of any new financing 
        (including loans, other credits, insurance, reinsurance, or 
        guarantee) to the government of the country or for a project 
        located within the country.
    (b) Waiver.--
            (1) In general.--The President may waive any action 
        provided for under subsection (a) if the President determines 
        that--
                    (A) taking such action would cause serious harm to 
                the national security of the United States; or
                    (B) it is in the vital economic interest of the 
                United States to do so and taking such action would 
                have an adverse impact on the United States economy 
                greater than the benefits of such action.
            (2) Notification.--The President shall promptly notify 
        Congress of a determination under paragraph (1) (and the 
        reasons for the determination, if made under paragraph (1)(B)) 
        and shall publish notice of the determination in the Federal 
        Register.
    (c) Reports.--The Secretary shall describe any action or 
determination pursuant to subsection (a) or (b) in the first semiannual 
report required by section 112 after the date of such action or 
determination.

SEC. 116. PERSISTENT FAILURE TO ADOPT APPROPRIATE POLICIES.

    (a) Persistent Failure To Adopt Appropriate Policies.--Not later 
than 360 days after the date on which a currency is designated for 
priority action pursuant to section 113(a)(3), the Secretary shall 
determine whether the country that issues such currency has adopted 
appropriate policies to eliminate the fundamental misalignment. The 
Secretary shall promptly notify Congress of such determination and 
shall publish notice of the determination in the Federal Register. If 
the Secretary determines that the country that issues such currency has 
failed to adopt appropriate policies to eliminate the fundamental 
misalignment, in addition to the provisions of section 115(a), the 
following shall apply with respect to the country until a notification 
described in subsection (b) is published in the Federal Register:
            (1) Action at the wto.--The United States Trade 
        Representative shall request consultations in the World Trade 
        Organization with the country regarding the consistency of the 
        country's actions with its obligations under the WTO Agreement.
            (2) Remedial intervention.--
                    (A) In general.--The Secretary shall consult with 
                the Board of Governors of the Federal Reserve System to 
                consider undertaking remedial intervention in 
                international currency markets in response to the 
                fundamental misalignment of the currency designated for 
                priority action, and coordinating such intervention 
                with other monetary authorities and the International 
                Monetary Fund.
                    (B) Notice to country.--At the same time the 
                Secretary takes action under subparagraph (A), the 
                Secretary shall notify the country that issues such 
                currency of the consultations under subparagraph (A).
    (b) Notification.--The Secretary shall promptly notify Congress 
when a country that issues a currency designated for priority action 
pursuant to section 113(a)(3) adopts appropriate policies to eliminate 
the fundamental misalignment, and publish notice of the action of that 
country in the Federal Register.
    (c) Waiver.--
            (1) In general.--The President may waive any action 
        provided for under this section, or extend any waiver provided 
        for pursuant to section 115(b), if the President determines 
        that--
                    (A) taking such action would cause serious harm to 
                the national security of the United States; or
                    (B) it is in the vital economic interest of the 
                United States to do so, and that taking such action 
                would have an adverse impact on the United States 
                economy substantially out of proportion to the benefits 
                of such action.
            (2) Notification.--The President shall promptly notify 
        Congress of a determination under paragraph (1) (and the 
        reasons for the determination, if made under paragraph (1)(B)) 
        and shall publish notice of the determination in the Federal 
        Register.
    (d) Reports.--The Secretary shall describe any action or 
determination pursuant to subsection (a), (b), or (c) in the first 
semiannual report required by section 112 after the date of such action 
or determination.

SEC. 117. CONGRESSIONAL DISAPPROVAL OF WAIVER.

    (a) Resolution of Disapproval.--
            (1) Introduction.--If a resolution of disapproval is 
        introduced in the House of Representatives or the Senate during 
        the 90-day period (not counting any day which is excluded under 
        section 154(b)(1) of the Trade Act of 1974 (19 U.S.C. 
        2194(b)(1)), beginning on the date on which the President first 
        notifies the Congress of a determination to waive action with 
        respect to a country pursuant to section 116(c)(1)(B), that 
        resolution of disapproval shall be considered in accordance 
        with this subsection.
            (2) Resolution of disapproval.--In this subsection, the 
        term ``resolution of disapproval'' means only a concurrent 
        resolution of the two Houses of the Congress, the sole matter 
        after the resolving clause of which is as follows: ``That the 
        Congress does not approve the determination of the President 
        under section 116(c)(1)(B) of the Currency Exchange Rate 
        Oversight Reform Act of 2007 with respect to ______, of which 
        Congress was notified on _____.'', with the first blank space 
        being filled with the name of the appropriate country and the 
        second blank space being filled with the appropriate date.
            (3) Procedures for considering resolutions.--
                    (A) Introduction and referral.--Resolutions of 
                disapproval--
                            (i) in the House of Representatives--
                                    (I) may be introduced by any Member 
                                of the House;
                                    (II) shall be referred to the 
                                Committee on Financial Services and, in 
                                addition, to the Committee on Rules; 
                                and
                                    (III) may not be amended by either 
                                Committee; and
                            (ii) in the Senate--
                                    (I) may be introduced by any Member 
                                of the Senate;
                                    (II) shall be referred to the 
                                Committee on Banking, Housing, and 
                                Urban Affairs; and
                                    (III) may not be amended.
                    (B) Committee discharge and floor consideration.--
                The provisions of subsections (c) through (f) of 
                section 152 of the Trade Act of 1974 (other than 
                paragraph (3) of such subsection (f)) (19 U.S.C. 
                2192(c) through (f)) (relating to committee discharge 
                and floor consideration of certain resolutions in the 
                House and Senate) apply to a concurrent resolution of 
                disapproval under this section to the same extent as 
                such subsections apply to joint resolutions under such 
                section 152.
    (b) Rules of House of Representatives and Senate.--This section is 
enacted by the Congress--
            (1) as an exercise of the rulemaking power of the House of 
        Representatives and the Senate, respectively, and as such are 
        deemed a part of the rules of each House, respectively, and 
        such procedures supersede other rules only to the extent that 
        they are inconsistent with such other rules; and
            (2) with the full recognition of the constitutional right 
        of either House to change the rules (so far as relating to the 
        procedures of that House) at any time, in the same manner, and 
        to the same extent as any other rule of that House.

SEC. 118. INTERNATIONAL FINANCIAL INSTITUTION GOVERNANCE ARRANGEMENTS.

    (a) Initial Review.--Notwithstanding any other provision of law, 
before the United States approves a proposed change in the governance 
arrangement of any international financial institution, as defined in 
section 1701(c)(2) of the International Financial Institutions Act (22 
U.S.C. 262r(c)(2)), the Secretary shall determine whether any member of 
the international financial institution that would benefit from the 
proposed change, in the form of increased voting shares or 
representation, has a currency that was designated a currency for 
priority action pursuant to section 113(a)(3) in the most recent report 
required by section 112. The determination shall be reported to 
Congress.
    (b) Subsequent Action.--The United States shall oppose any proposed 
change in the governance arrangement of the international financial 
institution (as defined in subsection (a)), if the Secretary renders an 
affirmative determination pursuant to subsection (a).
    (c) Further Action.--The United States shall continue to oppose any 
proposed change in the governance arrangement of the international 
financial institution, pursuant to subsection (b), until the Secretary 
determines and reports to Congress that the proposed change would not 
benefit any member of the international financial institution, in the 
form of increased voting shares or representation, that has a currency 
that is designated a currency for priority action pursuant to section 
113(a)(3).

SEC. 119. ADJUSTMENT FOR FUNDAMENTALLY MISALIGNED CURRENCY DESIGNATED 
              FOR PRIORITY ACTION.

    (a) In General.--Subsection (c)(2) of section 772 of the Tariff Act 
of 1930 (19 U.S.C. 1677a(c)(2)) is amended--
            (1) by striking ``and'' at the end of subparagraph (A);
            (2) by striking the period at the end of subparagraph (B) 
        and inserting ``; and''; and
            (3) by adding at the end the following:
                    ``(C) if required by section 115(a)(1) of the 
                Currency Exchange Rate Oversight Reform Act of 2007, 
                the percentage by which the domestic currency of the 
                producer or exporter is undervalued in relation to the 
                United States dollar.''.
    (b) Calculation Methodology.--Section 771 of the Tariff Act of 1930 
(19 U.S.C. 1677) is amended by adding at the end the following:
            ``(37) Percentage undervaluation.--The administering 
        authority shall determine the percentage by which the domestic 
        currency of the producer or exporter is undervalued in relation 
        to the United States dollar by comparing the nominal value 
        associated with the medium-term equilibrium exchange rate of 
        the domestic currency of the producer or exporter, identified 
        by the Secretary pursuant to section 112(b)(7) of the Currency 
        Exchange Rate Oversight Reform Act of 2007, to the exchange 
        rate used by the administering authority to convert the 
        domestic currency to United States dollars.''.

SEC. 120. NONMARKET ECONOMY STATUS.

    Paragraph (18)(B) of section 771 of the Tariff Act of 1930 (19 
U.S.C. 1677(18)(B)) is amended--
            (1) by striking ``and'' at the end of clause (v); and
            (2) by redesignating clause (vi) as clause (vii) and 
        inserting after clause (v) the following:
                            ``(vi) whether the currency of the foreign 
                        country is designated a currency for priority 
                        action pursuant to section 113(a)(3) of the 
                        Currency Exchange Rate Oversight Reform Act of 
                        2007, and''.

SEC. 121. APPLICATION TO CANADA AND MEXICO.

    Pursuant to article 1902 of the North American Free Trade Agreement 
and section 408 of the North American Free Trade Agreement 
Implementation Act (19 U.S.C. 3438), section 115(a)(1) and the 
amendments made by sections 119 and 120 shall apply with respect to 
goods from Canada and Mexico.

SEC. 122. ADVISORY COMMITTEE ON INTERNATIONAL EXCHANGE RATE POLICY.

    (a) Establishment.--
            (1) In general.--There is established an Advisory Committee 
        on International Exchange Rate Policy (in this section referred 
        to as the ``Committee'') The Committee shall be responsible 
        for--
                    (A) advising the Secretary in the preparation of 
                each report to Congress on international monetary 
                policy and currency exchange rates, provided for in 
                section 112; and
                    (B) advising the Congress and the President with 
                respect to--
                            (i) international exchange rates and 
                        financial policies; and
                            (ii) the impact of such policies on the 
                        economy of the United States.
            (2) Membership.--
                    (A) In general.--The Committee shall be composed of 
                9 members as follows, none of whom shall be from the 
                Federal Government:
                            (i) Congressional appointees.--
                                    (I) Senate appointees.--Four 
                                persons shall be appointed by the 
                                President pro tempore of the Senate, 
                                upon the recommendation of the Chairmen 
                                and Ranking Members of the Committee on 
                                Banking, Housing, and Urban Affairs and 
                                the Committee on Finance of the Senate.
                                    (II) House appointees.--Four 
                                persons shall be appointed by the 
                                Speaker of the House of Representatives 
                                upon the recommendation of the Chairmen 
                                and Ranking Members of the Committee on 
                                Financial Services and the Committee on 
                                Ways and Means of the House of 
                                Representatives.
                            (ii) Presidential appointee.--One person 
                        shall be appointed by the President.
                    (B) Qualifications.--Persons shall be selected 
                under subparagraph (A) on the basis of their 
                objectivity and demonstrated expertise in finance, 
                economics, or currency exchange.
            (3) Terms.--Members shall be appointed for a term of 4 
        years or until the Committee terminates. An individual may be 
        reappointed to the Committee for additional terms.
            (4) Vacancies.--Any vacancy in the Committee shall not 
        affect its powers, but shall be filled in the same manner as 
        the original appointment.
    (b) Duration of Committee.--The Committee shall terminate on the 
date that is 4 years after the date of the enactment of this Act unless 
renewed by the President pursuant to section 14 of the Federal Advisory 
Committee Act (5 U.S.C. App.) for a subsequent 4-year period. The 
President may continue to renew the Committee for successive 4-year 
periods by taking appropriate action prior to the date on which the 
Committee would otherwise terminate.
    (c) Public Meetings.--The Committee shall hold at least 1 public 
meeting each year for the purpose of accepting public comments. The 
Committee shall also meet as needed at the call of the Secretary or at 
the call of two-thirds of the members of the Committee.
    (d) Chairperson.--The Committee shall elect from among its members 
a chairperson for a term of 4 years or until the Committee terminates. 
A chairperson of the Committee may be reelected chairperson but is 
ineligible to serve consecutive terms as chairperson.
    (e) Staff.--The Secretary shall make available to the Committee 
such staff, information, personnel, administrative services, and 
assistance as the Committee may reasonably require to carry out its 
activities.
    (f) Application of Federal Advisory Committee Act.--
            (1) In general.--The provisions of the Federal Advisory 
        Committee Act (5 U.S.C. App.) shall apply to the Committee.
            (2) Exception.--Except for the annual public meeting 
        required under subsection (c), meetings of the Committee shall 
        be exempt from the requirements of subsections (a) and (b) of 
        sections 10 and 11 of the Federal Advisory Committee Act 
        (relating to open meetings, public notice, public 
        participation, and public availability of documents), whenever 
        and to the extent it is determined by the President or the 
        Secretary that such meetings will be concerned with matters the 
        disclosure of which would seriously compromise the development 
        by the United States Government of monetary and financial 
        policy.

SEC. 123. REPEAL OF THE EXCHANGE RATES AND INTERNATIONAL ECONOMIC 
              POLICY COORDINATION ACT OF 1988.

    The Exchange Rates and International Economic Policy Coordination 
Act of 1988 (22 U.S.C. 5301-5306) is repealed.

                          TITLE II--TAX REFORM

SEC. 201. PERMANENT SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

    (a) Banking, Financing, or Similar Businesses.--Subsection (h) of 
section 954 of the Internal Revenue Code of 1986 (relating to special 
rule for income derived in the active conduct of banking, financing, or 
similar businesses) is amended by striking paragraph (9).
    (b) Insurance Businesses.--Subsection (e) of section 953 of such 
Code (relating to exempt insurance income) is amended by striking 
paragraph (10) and by redesignating paragraph (11) as paragraph (10).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of a foreign corporation beginning after the 
date of the enactment of this Act, and to taxable years of United 
States shareholders with or within which such taxable years of such 
foreign corporation end.
                                 <all>