Proposed legislation titled The Fair Currency Act of 2007 was introduced recently in both the U.S. House and Senate to address the issue of China’s currency manipulation. The House bill, H.R. 782, introduced on Jan. 31, 2007 by Representatives Duncan Hunter (R-CA) and Tim Ryan (D-OH) is a World Trade Organization (WTO)-compliant bill that would add currency manipulation to the list of unfair trade practices actionable under U.S. trade law. Under this legislation, U.S. manufacturers could file currency complaints against China with the U.S. International Trade Commission and seek sanctions on Chinese products until the illegal practice of currency manipulation ends.

Senators Jim Bunning (R-KY) and Debbie Stabenow (D-MI) introduced a similar bill, S. 796, on March 7, 2007.  Under the Senate bill, "exchange-rate misalignment" would be considered a prohibited export subsidy for nom-market economies like China in countervailing duty cases and would also be a factor to consider in "market disruption" cases filed under the Trade Act of 1974.

Both bills provide injured U.S. companies key enforcement tools to seek relief where governments have sought to create artificial trade advantage for foreign companies through currency valuation manipulation. Such legislation could be one step in helping U.S. companies to remain competitive in global markets through fair, free trade.

For the past decade, the Chinese government has actively manipulated the valuation of its currency against other nations’ currencies to maintain a competitive advantage in trade. This currency manipulation—in conjunction with other factors—is responsible for the significant increase in the U.S. trade deficit with China—from $30 billion in 1994 to $162 billion in 2004. The practice of currency manipulation is generally considered illegal under international law, but aggrieved U.S. companies do not have adequate legal tools to seek necessary relief.

The Hunter-Ryan bill has 49 co-sponsors and was referred to the House Ways and Means, Financial Services, Foreign Affairs, and Armed Services committees.  The Bunning-Stabenow bill has four co-sponsors and was referred to the Senate Finance Committee.  Representative Sander Levin (D-MI), Chairman of the Trade Subcommittee, House Ways and Means, has indicated that the House will hold more hearings on this legislation, including some joint hearings by the various committees with jurisdiction. Similar action is also expected in the Senate.

While it is still very early in the legislative process, this bill is a topic of particular interest for many U.S. manufacturing groups. Nearly 70 industry and trade organizations, including the NASF, have already expressed their support for this legislation. This issue will also be a focus for the industry’s Capitol Hill visits during the NASF Washington Forum to be held May 1-3, 2007.  For more information on the NASF Washington Forum, visit the association website at www.nasf.org.