[Congressional Record Volume 151, Number 60 (Tuesday, May 10, 2005)]
[Senate]
[Pages S4871-S4872]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE:
  S. 984. A bill to amend the Exchange Rates and International Economic 
Policy Coordination Act of 1988 to clarify the definition of 
manipulation with respect to currency, and for other purposes; to the 
Committee on Banking, Housing, and Urban Affairs.
  Ms. SNOWE. Mr. President, I rise today to speak on the issue of 
currency policies and to offer a bill, the Fair Currency Practices Act 
of 2005, that will address key concerns regarding the Treasury 
Department's statutory review and reporting requirements on currency 
manipulation. In particular, this bill strengthens Treasury's hand in 
addressing currency manipulation, including the current practices of 
countries such as China.
  Through the practice of pegging its currency to the dollar, China 
artificially maintains the yuan, at 8.28 per dollar. While economists 
differ over the extent that China's currency is undervalued, it is 
often estimated to be undervalued by as much as fifteen to forty 
percent, rendering Chinese manufactured goods cheaper in the U.S.--and 
U.S. manufactured goods more expensive in China.
  China's deliberate and unfair currency practices have contributed to 
our Nation's trade deficit with China, reaching a record $162 billion 
last year. The yuan's undervaluation has had a profound impact on our 
Nation's manufacturing sector--particularly on U.S. manufacturing 
employment.
  As Chair of the Senate Committee on Small Business and 
Entrepreneurship, Co-Chair of the Senate Task Force on Manufacturing, 
and a Senator from a State with a rich history in manufacturing, I am 
keenly aware of this issue's importance. Indeed, our manufacturers--who 
are integral to our economic security and national defense--
unjustifiably struggle to compete with countries that disregard their 
international obligations.
  The U.S.-China Economic and Security Review Commission released a 
report today, which focuses on China's exchange rate problem. In the 
report, the Commission notes that foreign exchange markets are sending 
clear signals that China should revalue its yuan, and that in recent 
years all major currencies have adjusted upward with the exception of 
China's. The Commission explains that an appreciation of foreign 
currencies is needed to help correct the U.S. current account deficit.
  In the report, the Commission discusses the value of improving the 
process by which the Treasury Department assesses and reports upon the 
issue of foreign countries' currency manipulation. The legislation that 
I offer today, which is cosponsored by Senator Dole, makes substantial 
improvements to that process.
  Chair Manzullo, my counterpart in the House of Representatives is 
offering this bill today in the House. I thank him for his leadership 
on issues affecting our Nation's small businesses, and particularly for 
his efforts on behalf of our Nation's manufacturers.
  Specifically, the legislation amends the Exchange Rates and Economic 
Policy Coordination Act of 1988, to clarify that a country is 
manipulating its currency if it is engaged in ``protracted large-scale 
intervention in one direction in the exchange market.''
  The legislation also amends the 1988 Act to eliminate the necessity 
that a country have both a material global current account surplus and 
a significant bilateral trade surplus with the United States, before 
the Secretary of the Treasury is required to enter into negotiations 
with the offending country to end its unfair practices. The change 
requires such negotiations if there is either a material global current 
account surplus or a significant bilateral trade surplus with the 
United States.
  Currently, the Treasury Department, the International Monetary Fund, 
and others rely largely upon suspect Chinese data in determining 
China's trade balance with other countries. The legislation's final 
provision instructs the Treasury Department to undertake an exercise 
examining China's trade surplus. The investigation would include an 
analysis of why China's reported trade surplus with the U.S. and other 
countries differs from that reported by China's trading partners. The 
legislation requires that the Treasury Department submit a report of 
its investigation to Congress.
  Representative Manzullo and I will continue to collaborate on 
addressing unfair currency practices by offending countries. We Are 
both well aware of the negative effects these practices have on our 
Nation's small businesses. One of our combined efforts commissioned a 
General Accounting Office study which examined issues related to 
foreign government manipulation of world currency markets. That study 
is expected to be released soon.
  As in the past, I will continue to strive to draw greater attention 
to the effects of China's currency practices

[[Page S4872]]

and to find solutions that enable our domestic industries to compete on 
a level and fair playing field.
  I ask unanimous consent that the text of the bill and that a section-
by-section summary of the bill be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 984

       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 Practices Act 
     of 2005''.

     SEC. 2. AMENDMENTS RELATING TO INTERNATIONAL FINANCIAL 
                   POLICY.

       (a) Bilateral Negotiations.--Section 3004(b) of the 
     Exchange Rates and International Economic Policy Coordination 
     Act of 1988 (22 U.S.C. 5304(b)) is amended in the second 
     sentence by striking ``and (2)'' and inserting ``or (2)''.
       (b) Definition of Manipulation.--Section 3006 of the 
     Exchange Rates and International Economic Policy Coordination 
     Act of 1988 (22 U.S.C. 5306) is amended by adding at the end 
     the following:
       ``(3) Manipulation of rate of exchange.--For purposes of 
     this Act, a country shall be considered to be manipulating 
     the rate of exchange between its currency and the United 
     States dollar if there is a protracted large-scale 
     intervention in one direction in the exchange markets. The 
     Secretary may find that a country is manipulating the rate of 
     exchange based on any other factor or combination of 
     factors.''.
       (c) Report.--Not later than 90 days after the date of 
     enactment of this Act, the Secretary of the Treasury shall 
     undertake an examination, and submit a report to Congress, 
     regarding the trade surplus of the People's Republic of 
     China. The Secretary shall examine why the trade surplus with 
     the United States and other countries reported by the 
     People's Republic of China differs from the trade surplus 
     reported by the other countries. The report shall also 
     quantify the differences between the trade surplus reported 
     by the United States and other countries and what is reported 
     by the People's Republic of China.

          Legislation Addressing China's Currency Manipulation

       Background: The Exchange Rates and International Economic 
     Policy Coordination Act of 1998 (the 1998 Act) requires that 
     Treasury regularly make a determination of whether countries 
     are manipulating the rate of exchange between their currency 
     and the U.S. dollar for purposes of preventing effective 
     balance of payments adjustments or gaining an unfair 
     competitive advantage in international trade. If the 
     Secretary of Treasury considers that such manipulation is 
     occurring with respect to countries that (1) have material 
     global current account surpluses; and (2) have significant 
     bilateral trade surpluses with the United States, the 
     Secretary is required to take action to initiate negotiations 
     with such foreign countries on an expedited basis.
       Section 1--Short Title--This Act will be known as the Fair 
     Currency Practices Act of 2005.
       Section 2--Amendments Relating to International Financial 
     Policy.
       (a)--Amends the Trade Act to eliminate the necessity that a 
     country have both a material global current account surplus 
     AND a significant bilateral trade surplus with the United 
     States, before the Secretary of the Treasury is required to 
     enter into negotiations with the offending country to end its 
     unfair practices. The change requires such negotiations if 
     there is either a material global current account surplus OR 
     a significant bilateral trade surplus with the United States.
       Reasoning: Under current law, even if manipulation was 
     found, Treasury would not be required to act unless the 
     offending country has a significant bilateral trade surplus 
     with the U.S. AND a material global current account surplus. 
     The U.S.-China Economic and Security Review Commission 
     recommended in its 2004 Report to Congress that the material 
     global current account surplus condition not be required.
       (b)--Amends the 1988 Act to clarify that a country engaged 
     in ``protracted large-scale intervention in one direction in 
     the exchange market'' is manipulating its currency. This 
     language derives from the International Monetary Fund's (IMF) 
     Principles for Fund Surveillance Over Exchange Rate Policies.
       Reasoning: Treasury repeatedly fails to make a 
     determination that China is manipulating its currency and the 
     Trade Act does not specifically define ``manipulating.'' This 
     provision clarifies that a country engaged in ``protracted 
     large-scale intervention in one direction in the exchange 
     market'' is manipulating its currency. The provision does not 
     preclude the Secretary of Treasury from finding a country to 
     be manipulating its rate of exchange based on any other 
     factor or combination of factors.
       (c)--Requires that Treasury undertake an examination of 
     China's trade surplus and report on its findings. The 
     Department of Treasury should investigate why China's 
     reported trade surplus with the U.S. and other countries 
     differs from that reported by the trading partner countries. 
     The report should quantify these differences so that policy 
     makers will be better able to understand the facts behind 
     China's trade surplus.
       Reasoning: Treasury and the IMF use official Chinese 
     statistics when determining China's global current account 
     and trade balances. China's global current account and trade 
     balance statistics differ markedly from the aggregate 
     statistics of its trading partners. This results in an 
     inaccurate depiction of China's true surplus, which is 
     presumably much larger than reported by China.
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