[Congressional Record Volume 151, Number 16 (Tuesday, February 15, 2005)]
[Senate]
[Pages S1417-S1419]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LIEBERMAN:
  S. 377. A bill to require negotiation and appropriate action with 
respect to certain countries that engage in currency manipulation; to 
the Committee on Finance.
  Mr. LIEBERMAN. Mr. President, today, February 15, 2005, I rise to 
introduce a bill, proposing we enact the Fair Currency Enforcement Act 
of 2005. The present legislation addresses the practice of some 
governments to intervene aggressively in currency markets, or to peg 
their currencies at a fixed--artificially low--exchange rate, thus 
subsidizing their export sales and raising price barriers to imports 
from the United States. I introduced similar legislation last Congress, 
yet the problem remains unsolved.
  In recent years, particularly China has been pressed to float their 
currency upward. Specifically, the Europeans, the International 
Monetary Fund and the Bank for International Settlements have put 
pressure on the Chinese to at a minimum repeg their currency to a 
higher dollar value. The Administration has talked about this idea, but 
has been ineffective. As a consequence there has been no movement on 
the part of the Chinese.
  As a result of the heavy dollar buying, the Asian Central banks have 
allowed their foreign-exchange reserves to swell from less than $800 
billion at the start of 1999 to over $1.5 trillion in 2003. This is 
almost two-thirds of the global total.
  The world's seven biggest holders of foreign-exchange reserves are 
all in Asia.
  This legislation proposes that our Administration promptly open 
negotiations with the four Asian countries that exemplify this 
practice, with the intent to put a stop to it. These countries are: 
China, Japan, South Korea, and Taiwan. This practice hurts American 
manufacturers: it impedes their ability to introduce new products and 
technologies and provide Americans with quality jobs. It has caused and 
continues to cause the current economic recovery to be a jobless one, 
particularly in the manufacturing sector.
  Experts indicate that the United States has the right and the power 
to address unfair competitive practices under the following laws, rules 
and agreements: 1. Section 3004 of the Omnibus Trade and 
Competitiveness Act of 1988 2. Article IV of the Articles of Agreement 
of the International Monetary Fund Article 3. XV of the Exchange 
Agreements of the General Agreement on Tariffs and Trade 4. 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. 5. Article XXIII of the General Agreement on Tariffs 
and Trade. 6. Sections 301 and 406 of the Trade Act of 1974. 7. The 
provisions of the United States-China Bilateral Agreement on World 
Trade Organization Accession.
  These laws, rules and agreements provide us with ample process to do 
this right and it is important we act now. Therefore, beginning on the 
date of enactment of this Act, the President will be required to start 
a 90 day period of negations. If these negotiations fail to bear fruit, 
he is required to seek redress through the various international trade 
laws by instituting appropriate proceedings, or report to congress in 
detail why this is not a proper course of action.
  I ask unanimous consent that the text of the Bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 377

       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 ``Fair Currency Enforcement 
     Act of 2005''.

     SEC. 2. FINDINGS.

       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

[[Page S1418]]

     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 
     faces 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 under 
     utilized government support for trade promotion.

     SEC. 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.

     SEC. 4. FINDINGS OF FACT AND REPORT REGARDING CURRENCY 
                   MANIPULATION.

       (a) In General.--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) Report.--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).

     SEC. 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.

     SEC. 6. ADDITIONAL REPORTS AND RECOMMENDATIONS.

       (a) National Security.--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) Trade Enforcement.--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) Trade Promotion.--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.

     SEC. 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.

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