Bunning, Stabenow, Bayh Introduce Legislation Geared Towards Ending Currency Manipulation By China

U.S. Senators Jim Bunning, Debbie Stabenow, and Evan Bayh today introduced legislation, the China Currency Manipulation Act of 2008, that will put a stop to currency manipulation by China that is distorting international trade and creating a threat to the global economy. All three Senators also expect to work together in the near future to strengthen the trade remedies in Senate currency legislation reported by the Senate Finance and Banking Committees last summer.

In 1988, President Ronald Reagan signed legislation enacted by Congress that requires the Treasury Department to monitor the exchange rate policies of foreign nations, including China, and to report to Congress when any country intervenes to gain an advantage in trade with the United States by artificially depreciating the value of its currency.

Then Treasury Secretary Lloyd Bentsen cited China in 1994, but in the face of overwhelming evidence to the contrary, including a historic trade deficit, Treasury Secretary Henry Paulson maintains that China’s actions are unrelated to the obvious trade advantage that it gains by undervaluing its currency. The very recent nominal increase in the value of the Yuan still leaves the Chinese currency undervalued by between 30 percent and 40 percent, according to trade economists who have testified before Congress. Last year, the United States trade deficit with China was a record $256 billion, the largest with any nation.

Through its inaction, the Treasury Department has shown it is unwilling to apply the law in this area objectively, and this failure is a clear obstacle to resolution of the unsustainable United States trade deficit and related Chinese currency imbalance through international negotiations in the International Monetary Fund (IMF) and seeking remedies in the World Trade Organization (WTO).

"I don’t know why Secretary Paulson is ignoring the law," said Bunning. "Instead of traveling to Beijing to ‘kowtow’ to the new Chinese leadership, Secretary Paulson should be working with the growing number of countries that recognize the China currency threat to the global economy. Instead of praising China for small changes in policy, Secretary Paulson should apply the 1988 law as Congress intended. "

"Currency manipulation is a clear-cut form of unfair trade that is costing us jobs," said Stabenow. "Our trade deficit with China continues to grow, hitting $256 billion last year, thanks in no small part to China’s manipulation of their currency. The solution is simple - we must hold countries that cheat accountable. America can compete with anyone when the playing field is level, and this bill is a much needed step in the fight for fair trade." 

"American companies and workers are put at a major competitive disadvantage when China engages in massive intervention to lower the value of its currency and lower the cost of Chinese goods," Bayh said. "This legislation will force the Treasury Department to stop turning a blind eye to Chinese attempts to gain an unfair trade advantage by undervaluing their currency."

The Bunning-Stabenow-Bayh bill that is supported by the China Currency Coalition would require the Secretary of the Treasury to make a finding under the 1988 Act that China is manipulating its currency to gain an unfair trade advantage. It would require the Secretary of the Treasury to establish a plan of action within 30 days on its enactment with specific time frames and benchmarks to remedy China’s currency manipulation and to submit a report to Congress describing the plan. The legislation would also require the Secretary to seek consultations in the IMF under Article IV of the IMF charter with respect to China.  The provisions in the bill are similar to those outlined in the currency legislation that was approved by the Banking Committee last July.