WASHINGTON — The Senate Finance Committee overwhelmingly passed a bill Thursday that takes the first legislative step toward establishing rules to punish China if it does not boost the value of its currency.
The bill targets countries, notably China, that undervalue their currencies and lays out steps to reform their policies or ultimately face U.S. or World Trade Organization penalties. The committee approved the bill by a 20-to-1 vote, setting the stage for it to move to the Senate floor, although its fate in the Senate and House is uncertain due to jurisdictional disputes and competing bills.
Sen. Christopher Dodd (D., Conn.), chairman of the Senate Banking, Housing and Urban Affairs Committee, has said he will mark up his own bill next week, but the Finance Committee made the first inroads on the issue that has gained momentum on Capitol Hill.
At the Finance Committee hearing, senators repeatedly blamed China's undervalued currency for a record U.S. trade deficit with the country, which hit $232.5 billion in 2006, and the loss of manufacturing jobs in the U.S. Critics of China's policies argue that it keeps the yuan undervalued by as much as 40 percent to make its exports cheaper, which undercuts the competitiveness of U.S. manufacturers and workers.
"We recognized that some international currency exchange rate policies can be disruptive," said Sen. Max Baucus (D., Mont.), chairman of the committee. "We recognized that when a country's policies keep its currency undervalued, those policies make that country's products unfairly cheap here and we recognized that those policies also make American products unduly expensive there."
Baucus acknowledged the bill has been criticized.
"Some see this bill as too harsh and accuse the U.S. of China-bashing," he said. "Others see this bill as too weak and believe that we have given the administration too much discretion. I think we have struck the appropriate balance."
Industry observers closely watched the amendments senators offered to the bill Thursday to strengthen or weaken it. Sen. Jim Bunning (R., Ky.) withdrew an amendment that would have subjected imports to countervailing duties from countries that are deemed to "misalign" their currencies. His amendment would expand the current countervailing duty laws, which apply to imports that are deemed illegally subsidized, to define and include currency manipulation as an unfair subsidy."I believe this legislation could be strengthened if it includes a countervailing duty remedy as well," said Bunning, adding that he would pursue his amendment in the Banking Committee's bill or on the Senate floor.
The U.S. textile industry, which has argued the bill needs to be strengthened, was disappointed Bunning withdrew the amendment.
"A stronger bill would include the countervailing duties and not give the President such widespread discretion to stop trade remedies from occurring," said Cass Johnson, president of the National Council of Textile Organizations.
The bill approved by the Finance Committee was introduced in June by Baucus, Chuck Grassley (R., Iowa), Lindsey Graham (R., S.C.) and Charles Schumer (D., N.Y.), after Treasury Secretary Henry Paulson Jr. stopped short of accusing China of currency manipulation, choosing instead to use diplomatic pressure to get the Chinese to reform.
Although the bill does not target China specifically, it is intended to force a revaluation of the yuan and impose new consequences for inaction. The measure would direct the Treasury Department to redefine currency manipulation, establish new rules requiring the agency to identify "fundamentally misaligned" currencies to Congress biannually and could potentially result in U.S. and WTO penalties for the most egregious cases if bilateral negotiations fail. It would allow the U.S. for the first time to offset undervalued currencies by raising antidumping duties on Chinese imports.
Retailers and wholesale apparel importers who bring in billions of dollars worth of goods from China each year are concerned they could face higher duties. Erik Autor, vice president of international trade at the National Retail Federation, said the bill "will expose retailers to a great deal of unpredictability." Autor said retailers are concerned about how the government will determine how much a country's currency is undervalued and then base antidumping duties on that calculation.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews