The US Treasury Department’s decision not to label China a currency manipulator has triggered a sharp and quick response from the leadership of the trade committees in Congress. In its semi-annual congressionally mandated International Economic and Exchange Rate Policies report, the Treasury said that even though China’s currency, the yuan, is undervalued, it does not meet the technical requirement that the policy is being carried out for the purpose of preventing effective balance of payments adjustment or gaining unfair competition advantage in international trade.
The report said, “Even though the Treasury has not designated China according to the criteria of the law, the Treasury forcefully raises the Chinese exchange rate regime with Chinese authorities at every available opportunity and will continue to do so.” It went on to say China should not hesitate any longer to take “far more vigorous action” to rebalance its economy and to tackle the currency’s undervaluation. Shortly after the report was issued, the China central bank allowed the yuan to break through what had been a symbolically important level of 8 to the dollar. The move was seen as an effort by the Chinese to cool down the debate in the United States over its currency policies.
That did not satisfy members of Congress who serve on committees with jurisdiction over trade matters. Sens. Max Baucus, D-Mont., chairman of the Finance Committee, and Charles E. Grassley, R-Iowa, the ranking committee member, introduced legislation that would require the Treasury Department to develop a new report that identifies “fundamentally misaligned currency” as something requiring US action and eliminating the “intent” criteria. The bill would mandate the Treasury to consult with key trading partners and the International Monetary Fund to address currency problems. In addition, the Department of Commerce would be required to consider currency manipulation in evaluating anti-dumping cases.
On the House side, Democrats on the Ways and Means Committee said they plan to address currency manipulation problems in a number of ways with legislation that would put pressure on China and the administration to act. One such measure is the Ryan-Hunter bill, which is pending in the House and now has 105 cosponsors. It would define exchange-rate manipulation as a prohibited export subsidy and clarify that the US countervailing duty law applies to both market and nonmarket economies, such as China.
By James A. Morrissey, Washington Correspondent
