WASHINGTON — A bipartisan group of senators unveiled legislation Thursday that would target China’s undervalued currency and could lead to punitive tariffs on imports from China.
Lawmakers have been pressing for six years for a bill to crack down on China’s undervalued currency, which they argue makes Chinese exports cheaper and puts U.S.-produced goods at a competitive disadvantage.
The central component of the bill, an amalgam of two past, separate Senate bills would direct the Commerce Department to treat undervalued currency as an illegal export subsidy under U.S. trade remedy laws, which could lead to punitive tariffs on imports from China or other countries.
Senate Majority Leader Harry Reid (D., Nev.), who is pushing a China currency bill as part of the Democrats’ jobs agenda, has vowed to bring legislation to the floor for a vote quickly.
But the bill’s prospects in the House are less certain, because House leaders have not made the issue a top priority. The House passed a similar measure on a 348-79 vote last year, but the legislation stalled in the Senate during the lame-duck session.
It is also unclear whether the Obama administration would support such legislation. The Treasury Department has consistently declined to cite China for currency manipulation, which could lead to sanctions at the World Trade Organization, despite pressure from U.S. lawmakers to penalize China for an undervalued currency.
The new legislation would require Treasury to identify countries that “fundamentally misalign” their currencies and take action if countries fail to correct the misalignment. Under current law, Treasury must identify countries that “manipulate” their currency for purposes of gaining an unfair trade advantage.
Domestic textile groups, part of a broader coalition of 49 industry groups, known as The Fair Currency Coalition, support the legislation.
“In particular, the new Senate bill provides a WTO [World Trade Organization]-consistent manner for U.S. companies and workers to petition the U.S. Department of Commerce directly for the imposition of countervailing duties,” the coalition said. “These duties would offset injury caused by imports from any country that subsidizes exports of its products by fundamentally undervaluing its currency.”
However, opposition from a large swath of the business community is already gaining steam, which could further complicate the bill’s path forward.
A coalition of 51 business groups, including seven apparel and footwear importing and retailing trade associations, sent a letter to Reid and Minority Leader Mitch McConnell (R., Ky.) Wednesday, imploring leaders to oppose punitive currency legislation and warning of negative consequences.
“Legislation that would increase tariffs on imports from China is unlikely to create any incentive for China to move expeditiously to modify its exchange policies,” the coalition said. “Rather, it would likely have the opposite effect and result in retaliation against U.S. exports into China — currently the fastest growing market for U.S. exports.”
The coalition also said the legislation would threaten job creation and economic growth in the U.S. and shift attention from other broader initiatives aimed at addressing unfair trading practices, including rampant counterfeiting and restrictions on market access in China.