To amend the Tariff Act of 1930 and the Trade Act of 1974 to provide relief from certain practices by other countries, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Fair Trade with China Act of 2005''.

SEC. 2. FINDINGS.

     The Congress finds as follows:
            (1) The growth of the economy of the People's Republic of 
        China is one of the most important developments of the 21st 
        century.
            (2) The bilateral trade relationship between the United 
        States and China is heavily imbalanced and is undermining the 
        long-term economic health of the United States.
            (3) The United States trade deficit with China has doubled 
        since 2000, reaching $162,000,000,000 in 2004, the largest 
        bilateral trade deficit in the world.
            (4) As a consequence of the trade deficit, the United 
        States has had to borrow massive amounts of money from foreign 
        governments.
            (5) The United States has accumulated more debt to foreign 
        countries since 2000 than in the first 220 years of the 
        country's history.
            (6) China has become a major purchaser of United States 
        Treasury bonds, and United States indebtedness to the 
        Government of China has grown by more than $100,000,000,000 
        since 2000.
            (7) The large amounts of United States dollars accumulated 
        by the Government of China contribute to China's acquisitions 
        of United States companies, such as the proposed acquisition of 
        Unocal Corporation by the China National Offshore Oil 
        Corporation.
            (8) China continues to violate many of the commitments it 
        made when it joined the World Trade Organization in 2001.
            (9) China's inadequate enforcement of intellectual property 
        rights is resulting in infringement levels of 90 percent or 
        more for nearly all forms of intellectual property, and cost 
        American companies more than $2,500,000,000 in lost sales in 
        2004.
            (10) China's industrial policies discriminate against 
        foreign firms and products.
            (11) The Government of China continues to heavily subsidize 
        its manufacturing sector through tax incentives, preferential 
        access to credit and capital, subsidized utilities, and other 
        measures.
            (12) Since 1994, China has kept its currency pegged at 
        approximately 8.3 renminbi to the United States dollar, which 
        has caused the renminbi to become undervalued against the 
        dollar by as much as 40 percent, harming exports of United 
        States goods and services to China and providing an unfair 
        advantage to Chinese exports to the United States.
            (13) Current policies of the United States have failed to 
        advance and protect the interests of American workers, farmers, 
        and businesses in the United States-China trade relationship, 
        failed to address effectively China's unfair trade practices 
        and market access barriers to goods and services and its poor 
        record at protecting intellectual property rights, and failed 
        to stem or reverse the unsustainable United States trade 
        deficit with China.
            (14) It is critical that the United States develop and 
        implement a comprehensive and coherent set of policies to 
        address China's unfair trading practices and failure to abide 
        by its commitments as a member of the World Trade Organization.

SEC. 3. APPLICATION OF COUNTERVAILING DUTIES TO NONMARKET ECONOMY 
              COUNTRIES.

    (a) In General.--Section 701(a)(1) of the Tariff Act of 1930 (19 
U.S.C. 1671(a)(1)) is amended by inserting ``(including a nonmarket 
economy country)'' after ``country'' each place it appears.
    (b) Effective Date.--The amendments made by subsection (a) apply to 
petitions filed under section 702 of the Tariff Act of 1930 on or after 
the date of the enactment of this Act.
    (c) Antidumping Provisions not Affected.--The amendments made by 
subsection (a) shall not affect the status of a country as a nonmarket 
economy country for purposes of any matter relating to antidumping 
duties under the Tariff Act of 1930.

SEC. 4. TREATMENT OF CURRENCY MANIPULATION.

    (a) Definition of Unjustifiable Acts, Policies, and Practices.--
Section 301(d)(4)(B) of the Trade Act of 1974 (19 U.S.C. 2411(d)(4)(B)) 
is amended to read as follows:
            ``(B)(i) Acts, policies, and practices that are 
        unjustifiable include, but are not limited to, any act, policy, 
        or practice described in subparagraph (A) which involves 
        currency manipulation, or denies national or most-favored 
        nation treatment or the right of establishment or protection of 
        intellectual property rights.
            ``(ii) In this subparagraph, the term `currency 
        manipulation' means the protracted large-scale intervention by 
        an authority to undervalue its currency in the exchange market 
        that prevents effective balance of payments adjustment or gains 
        an unfair competitive advantage over the United States.''.
    (b) Investigation Into Currency Manipulation by the People's 
Republic of China.--
            (1) Investigation, determinations, actions.--The United 
        States Trade Representative shall--
                    (A) conduct an investigation, under sections 302 
                and 303 of the Trade Act of 1974, of the currency 
                practices of the People's Republic of China;
                    (B) make the applicable determinations under 
                section 304 of that Act pursuant to that investigation; 
                and
                    (C) implement any action, under section 305 of that 
                Act, in accordance with such determinations.
            (2) Initiation of investigation.--The United States Trade 
        Representative shall initiate the investigation required by 
        paragraph (1) not later than 90 days after the date of the 
        enactment of this Act.

SEC. 5. CLARIFICATION OF STANDARD FOR PRESIDENTIAL ACTION ON ITC 
              FINDING OF MARKET DISRUPTION.

    (a) Amendments to Standard for Trade Representative's 
Recommendation to the President.--Section 421(h)(2) of the Trade Act of 
1974 (19 U.S.C. 2451(h)(2)) is amended--
            (1) by striking ``(2) Within'' and inserting ``(2)(A) 
        Within''; and
            (2) by adding at the end the following:
    ``(B) In making a recommendation to the President under 
subparagraph (A), the Trade Representative shall consider the facts 
found, or conclusions drawn, by the Commission as they are reported to 
the Trade Representative, and the Trade Representative may not conduct 
an additional review or reconsideration of the facts found or 
conclusions reached by the Commission.
    ``(C) If the Commission in its report makes an affirmative finding 
of market disruption, the Trade Representative shall apply a 
presumption in favor of relief to prevent or remedy the market 
disruption.
    ``(D) The following factors may not be used as the basis of a 
recommendation by the Trade Representative to recommend denying relief 
under this section:
            ``(i) The presence or absence (whether actual or potential) 
        of third-country imports of the product under investigation.
            ``(ii) Any results of the econometric model known as the 
        Commercial Policy Analysis System (COMPAS) or equivalent 
        model.''.
    (b) Amendments to Standard for Presidential Action.--Section 421(k) 
of the Trade Act of 1974 (19 U.S.C. 2451(k)) is amended by adding at 
the end the following:
    ``(3) The President's determination shall be based on the facts 
found, or conclusions drawn, by the Commission as they are reported to 
the Trade Representative under subsection (g).
    ``(4) If the Commission in its report makes an affirmative finding 
of market disruption, the President shall apply a presumption in favor 
of relief to prevent or remedy the market disruption.
    ``(5) Any determination by the President under paragraph (1) that 
providing import relief is not in the national economic interest of the 
United States may not be based on the following factors:
            ``(A) The presence or absence (whether actual or potential) 
        of third-country imports of the product under investigation.
            ``(B) Any results of the econometric model known as the 
        Commercial Policy Analysis System (COMPAS) or equivalent 
        model.''.

SEC. 6. IDENTIFICATION OF TRADE EXPANSION PRIORITIES.

    (a) Identification of Trade Expansion Priorities.--Section 310 of 
the Trade Act of 1974 is amended to read as follows:

``SEC. 310. IDENTIFICATION OF TRADE EXPANSION PRIORITIES.

    ``(a) Identification.--
            ``(1) Identification and report.--Within 30 days after the 
        submission in each calendar year of the report required by 
        section 181(b), the Trade Representative shall--
                    ``(A) review United States trade expansion 
                priorities;
                    ``(B) identify priority foreign country practices, 
                the elimination of which is likely to have the most 
                significant potential to increase United States 
                exports, either directly or through the establishment 
                of a beneficial precedent; and
                    ``(C) submit to the Committee on Finance of the 
                Senate and the Committee on Ways and Means of the House 
                of Representatives and publish in the Federal Register 
                a report on the priority foreign country practices so 
                identified.
            ``(2) Factors.--In identifying priority foreign country 
        practices under paragraph (1), the Trade Representative shall 
        take into account all relevant factors, including--
                    ``(A) the major barriers and trade distorting 
                practices described in the National Trade Estimate 
                Report required under section 181(b);
                    ``(B) the trade agreements to which a foreign 
                country is a party and its compliance with those 
                agreements;
                    ``(C) the medium- and long-term implications of 
                foreign government procurement plans; and
                    ``(D) the international competitive position and 
                export potential of United States products and 
                services.
            ``(3) Contents of report.--The Trade Representative may 
        include in the report, if appropriate--
                    ``(A) a description of foreign country practices 
                that may in the future warrant identification as 
                priority foreign country practices; and
                    ``(B) a statement about other foreign country 
                practices that were not identified because they are 
                already being addressed by provisions of United States 
                trade law, by existing bilateral trade agreements, or 
                as part of trade negotiations with other countries, and 
                because progress is being made toward the elimination 
                of such practices.
    ``(b) Initiation of Consultations.--By no later than the date that 
is 21 days after the date on which a report is submitted to the 
appropriate congressional committees under subsection (a)(1), the Trade 
Representative shall seek consultations with each foreign country 
identified in the report as engaging in priority foreign country 
practices for the purpose of reaching a satisfactory resolution of such 
priority practices.
    ``(c) Initiation of Investigation.--If a satisfactory resolution of 
priority foreign country practices has not been reached under 
subsection (b) within 90 days after the date on which a report is 
submitted to the appropriate congressional committees under subsection 
(a)(1), the Trade Representative shall initiate under section 302(b)(1) 
an investigation under this chapter with respect to such priority 
foreign country practices.
    ``(d) Agreements for the Elimination of Barriers.--In the 
consultations with a foreign country that the Trade Representative is 
required to request under section 303(a) with respect to an 
investigation initiated by reason of subsection (c), the Trade 
Representative shall seek to negotiate an agreement that provides for 
the elimination of the practices that are the subject of the 
investigation as quickly as possible or, if elimination of the 
practices is not feasible, an agreement that provides for compensatory 
trade benefits.
    ``(e) Reports.--The Trade Representative shall include in the 
semiannual report required by section 309 a report on the status of any 
investigations initiated pursuant to subsection (c) and, where 
appropriate, the extent to which such investigations have led to 
increased opportunities for the export of products and services of the 
United States.''.
    (b) Initial Report on Chinese Practices.--Not later than 90 days 
after the date of the enactment of this Act, the United States Trade 
Representative shall identify, and report to the Congress on, priority 
foreign trade practices of the People's Republic of China, in 
accordance with section 310 of the Trade Act of 1974, as amended by 
subsection (a) of this section.
    (c) Conforming Amendment.--The item relating to section 310 in the 
table of contents of the Trade Act of 1974 is amended to read as 
follows:

``Sec. 310. Identification of trade expansion priorities.''.

SEC. 7. REQUIREMENT OF CASH DEPOSITS.

    Section 751(a)(1)(B) of the Tariff Act of 1930 (19 U.S.C. 
1675(a)(2)(B)) is amended--
            (1) by striking clause (iii); and
            (2) by redesignating clause (iv) as clause (iii).

SEC. 8. ITC INVESTIGATION.

    (a) Investigation.--The United States International Trade 
Commission shall conduct a study, under section 332 of the Tariff Act 
of 1930 (19 U.S.C. 1332), regarding how the People's Republic of China 
uses government intervention to promote investment, employment, and 
exports. The study shall comprehensively catalog, and when possible 
quantify, the practices and policies that central, provincial, and 
local government bodies in the People's Republic of China use to 
support and to attempt to influence decisionmaking in China's 
manufacturing enterprises and industries. Chapters of this study shall 
include, but not be limited to, the following:
            (1) Privatization and private ownership.
            (2) Price coordination.
            (3) Targeting of industries.
            (4) Banking and finance.
            (5) Utility rates.
            (6) Infrastructure development.
            (7) Taxation.
            (8) Restraints on imports and exports.
            (9) Research and development.
            (10) Worker training and retraining.
            (11) Rationalization and closure of uneconomic enterprises.
    (b) Timing of Reports on Investigation.--The Congress requests 
that--
            (1) not later than 9 months after the date of the enactment 
        of this Act, the International Trade Commission complete its 
        investigation under subsection (a) and submit a report on the 
        investigation to the Committee on Ways and Means of the House 
        of Representatives and the Committee on Finance of the Senate; 
        and
            (2) not later than 1 year after the report under paragraph 
        (1) is submitted, and annually thereafter through 2016, the 
        International Trade Commission prepare and submit to the 
        committees referred to in paragraph (1) an update of the 
        report.

SEC. 9. AMENDMENTS RELATING TO INTERNATIONAL FINANCIAL POLICY.

    (a) Bilateral Negotiations.--Section 3004(b) of the Exchange Rates 
and International Economic Policy Coordination Act of 1988 (22 U.S.C. 
5304(b)) is amended in the second sentence by striking ``(1) have 
material global account surpluses; and (2)''.
    (b) Definition of Manipulation.--Section 3006 of the Exchange Rates 
and International Economic Policy Coordination Act of 1988 (22 U.S.C. 
5306) is amended by adding at the end the following:
            ``(3) Manipulation of rate of exchange.--A country shall be 
        considered to be manipulating the rate of exchange between its 
        currency and the United States dollar if there is a protracted 
        large-scale intervention by an authority to undervalue its 
        currency in the exchange market that prevents effective balance 
        of payments adjustment or gains an unfair competitive advantage 
        over the United States.''.
    (c) Report.--Section 3005(b) of the Exchange Rates and 
International Economic Policy Coordination Act of 1988 (22 U.S.C. 
5305(b)) is amended--
            (1) by striking ``and'' at the end of paragraph (7);
            (2) by striking the period at the end of paragraph (8) and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(9) a detailed explanation of the test the Secretary uses 
        to determine whether or not a country is manipulating the rate 
        of exchange between that country's currency and the dollar for 
        purposes of preventing effective balance of payments adjustment 
        or gaining an unfair competitive advantage over the United 
        States.''.

Summary: Fair Trade with China Act of 2005 - Amends the Tariff Act of 1930 to apply its countervailing duty requirements to nonmarket economy countries. Amends the Trade Act of 1974, with respect to enforcement of US rights under trade agreements and response to certain foreign trade practices, to include unjustifiable acts, policies, or practices which involve currency manipulation. Requires the US Trade Representative (USTR) to investigate the currency practices of the People's Republic of China (PRC), make applicable determinations, and implement any appropriate action. Requires the USTR to: (1) first initiate consultations with each foreign country identified as engaging in priority foreign country practices to reach a satisfactory resolution of such practices. And (2) then investigate the practices in question if a satisfactory resolution has not been reached within a specified period. Requires the USTR to identify and report to Congress on such PRC priority foreign trade practices. Amends the Tariff Act of 1930 to repeal the requirement that the administering authority direct the Customs Service to allow an importer to opt to post a bond or security, until completion of the review, in lieu of a cash deposit for each entry of the subject merchandise . the US International Trade Commission to study and report to Congress on how the PRC uses government intervention to promote investment, employment, and exports. Amends the Exchange Rates and International Economic Policy Coordination Act of 1988 with respect to bilateral negotiations with countries considered to manipulate the rate of exchange between their currency and the US dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade. Reduces the preconditions for the initiation of negotiations by the Secretary of the Treasury to possession of significant bilateral trade surpluses with the United States . Declares that a country shall be considered to be manipulating the rate of exchange between its currency and the US dollar if there is a protracted large-scale intervention by an authority to undervalue its currency in the exchange market that prevents effective balance of payments adjustment or gains an unfair competitive advantage over the United States.