Senate panel OKs currency manipulation bill
By William L. Watts, MarketWatch
Last Update: 5:19 PM ET Jul 26, 2007
marketwatch.com
WASHINGTON (MarketWatch) -- Taking a shot at China and its management of the yuan, the Senate Finance Committee on Thursday overwhelmingly approved legislation that would require the Treasury Department to negotiate with countries with "fundamentally misaligned" currencies.
It would also impose trade penalties on countries that fail to take action, include taking complaints to the World Trade Organization. The committee approved the legislation in a 20-1 vote.
"For far too long, American workers and business have been hurt by foreign governments that seek an unfair competitive advantage by undervaluing their currency," said Senate Finance Committee Chairman Max Baucus, D-Mont. "This bipartisan, WTO-consistent legislation will ensure that America cracks down on currencies that are significantly out of sync with the U.S. dollar."
The legislation doesn't mention China by name. But it is rooted in bipartisan anger on Capitol Hill among lawmakers who contend that the yuan's peg to the U.S. dollar continues to leave the currency undervalued, to the detriment of U.S.-based exporters.
"There is no doubt that China and other nations have been undervaluing their currency to give themselves an advantage," said Sen. Lindsey Graham, R-S.C. "For too long the game has been rigged against American business. Working together we will change currency practices to put American business on a level playing field."
Graham and Sen. Charles Schumer, D-N.Y., introduced legislation two years ago that would have imposed 27% tariffs on all Chinese imports unless Beijing took steps to float the yuan. Despite opposition from the White House, the measure won a key Senate test vote in the spring of 2005.
Graham and Schumer subsequently said they never intended the measure to become law, but noted that it served as a cudgel in convincing Chinese authority to loosen the peg between the dollar and the yuan. While the Chinese currency has since appreciated somewhat against the dollar, lawmakers say the yuan remains artificially undervalued.
The bill passed Thursday requires Treasury to identify "fundamentally misaligned" currencies to Congress twice a year, and would require the government to take steps to punish countries that fail to address misalignments within a year.
Also, the Treasury secretary would be required to consult with the Federal Reserve and other central banks on potential intervention steps. End of Story
William L. Watts is a reporter for MarketWatch. |
