AMT: Senate Approves Chinese Currency Bill
On October 11, the Senate passed with a vote of 63-35 the Currency Exchange Rate Oversight Reform Act, S. 1619. The bipartisan bill, sponsored by Sens. Chuck Schumer (D-NY) and Sherrod Brown (D-OH), would place new duties on imports from nations that devalue their currency in order to keep their export prices low.
Although the legislation doesn’t specifically mention China, it allows U.S. retaliation against China’s long practice of holding down the price of the yuan. A recent study by the Economic Policy Institute estimates this practice contributed to our record high trade deficit with China in 2010 and the loss of nearly 2 million manufacturing jobs over the last decade. Opponents of the legislation, including the Business Roundtable and the U.S. Chamber of Commerce, recently wrote the Senate leadership arguing against unilateral legislation that ignores other issues that are contributing to the unlevel global playing field for American businesses.
Congress has been trying to pass similar legislation for years. The economy, jobless rate, and general voter unrest could help advance this bill, but it is doubtful it will be enacted into law. Attention now moves to the House, where Republican leaders are under pressure to take up the legislation - which they oppose. House Speaker John Boehner (R-OH) has been vocal in his opposition to the bill and warned against igniting a trade war with one of our most important trading partners during these fragile economic times.
Should the bill make it through the House and reach the president’s desk, it is unclear whether Obama would sign it. The Obama administration, like the Bush administration before it, has been critical on China’s currency policies, but has stopped short of labeling China a currency manipulator. It cites the fact that tough negotiations have led to China allowing the value of the yuan to appreciate, while acknowledging that it is still substantially undervalued (some estimate by as much as 40%). So far, the president has avoided taking a position on S. 1619 but cautioned in a recent press conference that the legislation may violate international laws.
AMT supports the House leadership’s position that it is not for Congress to legislate another country’s monetary policy and that we risk Chinese retaliation against U.S. manufacturing if we proceed. For U.S. manufacturing technology, that could have disastrous consequences. Despite the challenges, the Chinese market is critical. The last decade has seen China rise to become the largest consumer of manufacturing technology. Just 10 years ago, China represented only 14 percent of the global manufacturing technology market, second to U.S.-based consumers. Today, China consumes more than 45% of all the manufacturing technology annually. In addition, U.S. manufacturers rely on components from China to build the products substantially manufactured in the United States. In fact, without these Chinese-produced intermediate products, manufacturing in the United States would come to a halt.
AMT is following developments on this issue and urges you to contact your members of Congress to let them know that S. 1619 will not improve U.S. global competitiveness and could very well have the opposite effect.