Tough new US currency bill unveiled
Friday, 15 June 2007
WASHINGTON, June 14 (AFP): High powered US Senators yesterday unveiled a tough new attempt to punish countries with "misaligned" currencies, hours after the Treasury decided not to brand China a "currency manipulator."
The new bill, which Senators predicted would pass with a veto-proof majority in both chambers of Congress, reforms criteria for declaring a currency out of line, and introduced new penalties for lack of action by a foreign government.
"This bill requires the Treasury Department to take firm but fair action when other nations play games with the US dollar," said Senate Finance Committee Chairman, Democratic Senator Max Baucus.
The committee's top Republican, Senator Charles Grassley, denied the bill was specifically targeted at China.
"We are not picking a fight with anyone. Twenty years ago this legislation could have applied to Japan, tomorrow it could apply to country 'X.'
"In some senses, it is a velvet glove with a steel fist inside."
The legislation also overhauls the Treasury framework used to declare a currency artificially out of line, which currently requires a transgressing government to be branded a "currency manipulator."
"They will have to twist themselves into a pretzel in order not to find misalignment," said New York Democratic Senator Chuck Schumer.
The bill will be dealt with in committee within months and could make it to the Senate floor by September.
It requires Treasury officials to identify "fundamentally misaligned" currencies to Congress twice a year and categorises them for "priority action" if the misalignment is the result of government economic planning.
The designation requires the US government to oppose changes in International Monetary Fund (IMF) rules on the offending nation.
If a targeted government fails to bring its currency into line within six months, it faces further steps, including suspension of US government procurement and suspension of loans and private insurance from the Overseas Private Investment Corporation to US firms operating in the country. If the situation is not improved within a year, the bill requires the US Trade Representative to start World Trade Organization dispute settlement proceedings on the currency spat.
Under the new legislation, the president will have the power to waive the bill's requirements on the grounds of national security of US economic interest.
Earlier, the Treasury said China's tightly controlled exchange rates had led to a massive buildup in currency reserves that posed global economic risks.
The report said these policies have left the Chinese yuan undervalued but that US officials could not conclude that this was a result of a deliberate effort to gain an unfair trade advantage.
Earlier, Senate Banking Committee Chairman Senator Chrisopher Dodd, unveiled separate legislation designed to tighten the definition of "currency manipulation."
The new bill, which Senators predicted would pass with a veto-proof majority in both chambers of Congress, reforms criteria for declaring a currency out of line, and introduced new penalties for lack of action by a foreign government.
"This bill requires the Treasury Department to take firm but fair action when other nations play games with the US dollar," said Senate Finance Committee Chairman, Democratic Senator Max Baucus.
The committee's top Republican, Senator Charles Grassley, denied the bill was specifically targeted at China.
"We are not picking a fight with anyone. Twenty years ago this legislation could have applied to Japan, tomorrow it could apply to country 'X.'
"In some senses, it is a velvet glove with a steel fist inside."
The legislation also overhauls the Treasury framework used to declare a currency artificially out of line, which currently requires a transgressing government to be branded a "currency manipulator."
"They will have to twist themselves into a pretzel in order not to find misalignment," said New York Democratic Senator Chuck Schumer.
The bill will be dealt with in committee within months and could make it to the Senate floor by September.
It requires Treasury officials to identify "fundamentally misaligned" currencies to Congress twice a year and categorises them for "priority action" if the misalignment is the result of government economic planning.
The designation requires the US government to oppose changes in International Monetary Fund (IMF) rules on the offending nation.
If a targeted government fails to bring its currency into line within six months, it faces further steps, including suspension of US government procurement and suspension of loans and private insurance from the Overseas Private Investment Corporation to US firms operating in the country. If the situation is not improved within a year, the bill requires the US Trade Representative to start World Trade Organization dispute settlement proceedings on the currency spat.
Under the new legislation, the president will have the power to waive the bill's requirements on the grounds of national security of US economic interest.
Earlier, the Treasury said China's tightly controlled exchange rates had led to a massive buildup in currency reserves that posed global economic risks.
The report said these policies have left the Chinese yuan undervalued but that US officials could not conclude that this was a result of a deliberate effort to gain an unfair trade advantage.
Earlier, Senate Banking Committee Chairman Senator Chrisopher Dodd, unveiled separate legislation designed to tighten the definition of "currency manipulation."