While the focus of the “Lame Duck” Congress will be to keep us from falling off the cliff of financial ruin from reaching the debt ceiling and sequestration, there are two bills passed by one body of Congress but not the other that should be passed. Both of these bills would be beneficial to America’s manufacturing industry.
The first bill addresses a topic many Americans supported during the latter part of Governor Mitt Romney’s campaign for president ? he “took a hard line in his campaign, promising to cite China for its currency peg on day one of his presidency. National polling makes clear that the American people overwhelmingly support such action on China’s brazen violations of world trade law, including its currency undervaluation.”
The Currency Exchange Rate Oversight Reform Act of 2011 (S. 1619) is an international trade bill that would establish US duties on imports from countries with undervalued currencies. The bill was approved by the Senate on October 11, 2011 by a vote of 63-35, but H.R.639, the Currency Reform for Fair Trade Act, has not been brought up for a vote yet in the House of Representatives even though it has strong bipartisan, majority support with 234 lawmakers, including 65 Republicans, as cosponsors. U.S. Rep. Sander Levin, D-MI and ranking member on Ways and Means, introduced the legislation. The bill remains in the Ways and Means Subcommittee on Trade.
Speaker of the House John Boehner (R-OH) has continued to block a vote on the bill despite overwhelming support. Speaker Boehner has said in statements that the United States should not dictate currency policy for another country and that he will oppose attempts to bring this bill to the floor for vote. It is clear that Speaker Boehner is single-handedly thwarting the majority will of both Congress and the American people. It is hard to understand why Boehner would stand in the way of such modest legislation to address China’s mercantilism.
On the Senate website, Sen. Sherrod Brown (D-OH) said, “China’s currency manipulation has already cost 3 million American jobs–2 million of which came from our manufacturing sector. The bill that passed [Oct. 11] could create 1.6 million American jobs.”
In 2010, the House passed a similar bill, H.R.2378, the Currency Reform for Fair Trade Act, by a strong, bipartisan vote of 348-79, including 99 Republicans, but the Senate failed to pass their version of the bill.
The problem of Chinese currency manipulation has actually gotten worse in the past year since the Senate bill passed. The New York Times’ Keith Bradsher “reports that Beijing has actually depreciated its currency more of late. The Yuan fell nearly 1 percent against the dollar last month, and Bradsher says this is the “largest drop since Beijing officials unpegged the currency from the dollar in July 2005. The fact that Beijing can adjust its currency so precisely is proof yet again that it deliberately manipulates the Yuan to gain an export advantage.”
We cannot continue to run up a massive trade deficit with China. The U.S. trade deficit in goods and services increased from $500 billion in 2010 to $558 billion in 2011, an increase of $58 billion (11.6 percent). The massive sales of Chinese exports to the U.S. is fueled by China’s deliberately undervalued currency. By pegging its currency to the dollar at an artificially low rate, Beijing is making sure that its exports are exceedingly cheap in the U.S. Conversely, U.S. exports are more expensive due to this preferential currency rate.
How would this bill help? The bill calls for the Treasury Department to identify countries whose currencies are undervalued, and then instruct the Commerce Department to impose duties on imports from those aforementioned countries. Key points of the Currency Exchange Rate Oversight Reform Act of 2011 include:
* Improves the oversight of the currency exchange rate by the Treasury.
* Clarifies the countervailing duty law to address currency under-evaluation.
* States that Commerce may not refuse to investigate a subsidy allegation. This clarification is supported by the WTO’s Appellate Body and is a key element in the previous Brown-Snowe currency bill and in HR 2378, which passed in September 2010.
* Triggers a series of consequences, including: Immediate: “consider designation of a country’s currency as a ‘priority’ currency when determining whether to grant the country ‘market economy’ status for purpose of U.S. antidumping law.”
After 90 days: “forbid federal procurement of goods and services from the designated country unless that country is a member of the WTO Government Procurement Agreement,” and “forbid Overseas Private Investment Corporation financing or insurance for projects in the designated country.”
After 360 days and failure to adopt appropriate policies: “The administration must require the U.S. Trade Representative to request dispute settlement consultations in the World Trade
Organization with the government responsible for the currency,” and “require the Department of Treasury to consult with the Federal Reserve Board and other central banks to consider remedial intervention in currency markets.”
The bill also stipulates that “countries that fail to fix their currencies would be subject to higher anti-dumping duties and other penalties, such as a procurement ban, not receiving financing from the Overseas Private Investment Corporation, and U.S. opposition to multilateral bank financing for the targeted countries.”
Passage of this bill would be an obvious step forward to provide a level playing field for America’s manufacturers and their workers.
The other important bill, “The American Manufacturing Competitiveness Act” (HR-5865), co-sponsored by Illinois Reps. Dan Lipinski (D) and Adam Kinzinger (R), passed the House on September 12, 2012 by a vote of 339-77.
“H.R. 5865 establishes the American Manufacturing Competitiveness Board within the Department of Commerce to advise the President on issues affecting manufacturing in the United States. The board would be required to perform a comprehensive analysis of the nation’s manufacturing sector and, using results from the analysis, develop a strategy to improve the competitiveness of domestic manufacturing efforts. Results from the analysis and strategy would be available to the President to comply with the bill’s requirement to publish a strategy in 2014 and again in 2018 to promote growth in the nation’s manufacturing sector.”
The board would consist of 15 members: five from the public sector appointed by the President, including two governors from different parties; and 10 people from the private sector appointed by the House and the Senate, with the Majority appointing three and the Minority appointing two from each chamber.
In preparing the analysis, the board would be required to study, among other things:
- The current environment for manufacturing, including government policies—at the international, federal, state, tribal, and local levels—that affect the sector;
- Forecasts, both short- and long-term, for domestic and international trends in manufacturing;
- Actions by federal agencies that affect manufacturing; and
- Factors that affect the growth and stability of the sector such as workforce skills;
- Trade, energy, and monetary policies; research and development; and protections for intellectual property.
Using results from the analysis, the board would be required to develop a strategy to improve the competitiveness of the nation’s manufacturing sector. The bill would require the strategy to include recommendations to eliminate or consolidate government programs, improve interaction between the government and the manufacturing sector, and amend any regulations that put the industry at a competitive disadvantage in international markets.
The final report also would be required to include a plan to implement the strategy, including an estimate of the cost to implement it as well as recommendations for ways to cover those costs.
In April 2011, The Information Technology& Innovation Foundation (ITIF) released a report, “The Case for a National Manufacturing Strategy,” that made a strong case for such a strategy. Authors Stephen Ezell and Robert Atkinson present information on five key reasons why manufacturing is important to the U.S. economy:
1. It will be extremely difficult for the United States to balance its trade account without a healthy manufacturing sector.
2. Manufacturing is a key driver of overall job growth and an important source of middle-class jobs for individuals at many skill levels.
3. Manufacturing is vital to U.S. national security.
4. Manufacturing is the principal source of R&D and innovation activity.
5. The manufacturing and services sectors are inseparable and complementary.
The authors also present three primary reasons on why the United States needs a manufacturing strategy:
1. Other countries have strategies to support their manufacturers and by lacking similar strategies we are therefore forcing our manufacturers to compete at a disadvantage.
2. Systemic market failures mean that absent manufacturing policies, U.S. manufacturing will underperform in terms of innovation, productivity, job growth, and trade performance.
3. If a country loses complex, high-value-added manufacturing sectors, it is unlikely to get them back, even if the dollar were to decline dramatically.
While not perfect, this bill would be a good start in developing a national manufacturing strategy. Contact your senator or representative to urge them to vote on these bills.