Jan 17 (Reuters) - A group of senators said on Monday they would push for approval of a bipartisan bill pressing China to more quickly raise the value of its currency.
The announcement, which came on the eve of Chinese President Hu Jintao’s state visit to Washington, showed China’s currency practices remain a potent issue in Congress.
But both the Senate and the House of Representatives would have to approve the bill, and President Barack Obama would have to sign it, for it to become law.
Supporters claim wide support for the measure, but previous efforts to pass currency legislation directed at China have failed because of concerns it could trigger retaliation by Beijing, which is the biggest foreign holder of U.S. government debt.
Following are details of current U.S. law and the proposed Currency Exchange Rate Oversight Reform Act of 2011:
— The U.S. Treasury Department, in consultation with the International Monetary Fund, shall analyze the exchange rate policies of foreign countries on an annual basis.
— Semiannual reports are due April 15 and Oct. 15, although the reports are often delayed for political reasons as has been the case with the most recent report.
— The reports examine whether countries are manipulating their currency’s exchange rate with the U.S. dollar “for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.”
— If manipulation is found, the Treasury secretary shall “initiate negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar.”
— The secretary “shall not be required to initiate negotiations in cases where such negotiations would have a serious detrimental impact on vital national economic and security interests.”
— Treasury under the Currency Exchange Rate Oversight Reform Act of 2011 would be required to drop its “manipulation” criteria in favor of determining whether a currency is “fundamentally misaligned” based on objective criteria or clear policy action from the relevant government.
— The latter designation would trigger a priority investigation from the U.S. Commerce Department as to whether the undervaluation is an unfair subsidy for that country’s exports at the expense of U.S. industry. It must then impose import duties to counteract the subsidy.
— Treasury would be required to immediately consult with all countries with misaligned currencies and engage the International Monetary Fund in priority cases.
— After 90 days of the designated country’s failure to make appropriate policies, the U.S. must incorporate the currency undervaluation into its dumping calculations for products from that country.
— Federal purchases of goods and services from the country would be prohibited unless the country is a member of the World Trade Organization’s Government Procurement Agreement — a provision aimed squarely at China.
— After 360 days of failure to adopt appropriate policies, the U.S. Trade Representative must request WTO dispute settlement consultations with the designated country.
— The U.S. Treasury also would be required to consult with the Federal Reserve and other central banks to consider remedial intervention in currency markets.
— The U.S. president could put the process on hold after the initial 90 days of inaction if he determined that it would harm national security or the economic interests of the United States, but this must be explained and could be overridden by a congressional disapproval resolution.
— The bill would create a new body that the Treasury must consult while developing its report. Eight of the nine members would be chosen by Congress. (Reporting by Doug Palmer in Washington; Editing by Sandra Maler)