Currency Reform for Fair Trade Act 2009 – The Facts

Countries that manipulate their currency are given unfair trade advantages. Specifically, China’s currency manipulation has run up a $1.4 trillion trade surplus with the U.S. since 2001.

Like previous bills, this bill would target nations, such as China, that manipulate their currency values to receive export and manufacturing advantages. However, the Currency Reform for Fair Trade Act of 2009 (CRFTA) departs from previous bills by focusing only on the trade aspect of currency misalignment. The CRFTA will:

  • Ensure that standard, World Trade Organization (WTO)-consistent trade remedies are available to complement the diplomatic process from a monetary standpoint under the Omnibus Trade and Competitiveness Act of 1988.
  • Direct the U.S. Department of Commerce to measure whether a country’s currency is fundamentally misaligned. These calculations will be public and will us reliable, public data available from the IMF as well as the two primary methodologies and guidelines that the IMF follows in its computations of exchange-rate misalignment.
  • Clarify that any foreign government’s undervaluation of its currency by means of such intervention can be offset by means of either countervailing duties or antidumping duties. Consistent with WTO rules these remedies are imposed only when the U.S. International Trade Commission determines that the unfair practice has caused or threatens to cause material injury to U.S. companies and workers. It is the effect or impact of the exchange-rate misalignment, not the foreign government’s purpose or intent underlying this policy, that is controlling as far as the WTO’s agreements are concerned.
  • Consistent with WTO rules, direct the U.S. Department of Commerce to treat currency undervaluation as a prohibited export-contingent subsidy. The text of the WTO’s Agreement on Subsidies and Countervailing Measures and related jurisprudence support the conclusion that undervaluation of a currency through a government’s protracted, large-scale intervention in exchange markets constitutes a prohibited, countervailable export subsidy.
  • Consistent with WTO rules, alternatively provide that when calculating dumping margins adjustments will be made to the foreign exporter’s U.S. price to offset undervaluation. Also consistent with the WTO’s standards, imposition of only one or the other remedy of countervailing and antidumping duties will be allowed. Existing U.S. law prohibits such “double-counting,” that is, the simultaneous application of countervailing and antidumping duties to counter the same export subsidy.

Source: Fair Currency Coalition. For more information, visit www.faircurrency.org.