II 

109TH CONGRESS 

1ST SESSION S. 377 

To require negotiation and appropriate action with respect to certain countries 

that engage in currency manipulation. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 15, 2005 

Mr. LIEBERMAN introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL 

To require negotiation and appropriate action with respect 

to certain countries that engage in currency manipulation. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Fair Currency En5 forcement Act of 2005’’. 

6 SEC. 2. FINDINGS. 

7 Congress makes the following findings: 

8 (1) The manufacturing sector is an important 

9 driver of the United States economy, contributing al10 most 30 percent of our economic growth during the 
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1 1990’s, and twice the productivity growth of the 

2 service sector during that period. 

3 (2) The manufacturing sector contributes sig4 nificantly to our Nation’s development of new prod5 ucts and technologies for world markets, performing 

6 almost 60 percent of all research and development in 

7 the United States over the past two decades. 

8 (3) The manufacturing sector provides high 

9 quality jobs, with average weekly wages between 20 

10 and 30 percent higher than jobs in the service sec11 tor. 

12 (4) The manufacturing growth creates a signifi13 cant number of jobs and investments in other sec14 tors of the economy, and this ‘‘multiplier effect’’ is 

15 reckoned by economists to be larger (2.43 to 1) than 

16 for any other significant sector of the economy. 

17 (5) The ‘‘jobless recovery’’ from the recent re18 cession has witnessed the worst job slump since the 

19 Great Depression and the weakest employment re20 covery on record. 

21 (6) The manufacturing sector has been hit the 

22 hardest by the jobless recovery. 

23 (7) A significant factor in the loss of valuable 

24 United States manufacturing jobs is the difficulty 
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1 faced by United States manufacturers in competing 

2 effectively against lower priced foreign products. 

3 (8) A significant obstacle to United States man4 ufacturers in competing against foreign manufactur5 ers is the practice of some governments of inter6 vening aggressively in currency markets, or pegging 

7 their currencies at fixed rates, to maintain their own 

8 currencies at artificially low valuations, thus sub9 sidizing their export sales and raising price barriers 

10 to imports from the United States. 

11 (9) Certain Asian countries exemplify this prac12 tice. China, Japan, South Korea, and Taiwan together have accumulated approximately 1 13 ⁄2 of the 

14 world’s total currency reserves. The vast majority of 

15 these reserves, perhaps as high as 90 percent, are in 

16 dollars. These same 4 countries account for 60 per17 cent of the United States world trade deficit in man18 ufactured goods. These reserves are symptomatic of 

19 a strategy of intervention to manipulate currency 

20 values. 

21 (10) The People’s Republic of China is particu22 larly aggressive in intervening to maintain the value 

23 of its currency, the renminbi, at an artificially low 

24 rate. China maintains this rate by mandating for25 eign exchange sales at its central bank at a fixed ex-
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1 change rate against the dollar, in effect, pegging the 

2 renminbi at this rate. This low rate represents a sig3 nificant reason why China has contributed the most 

4 to our trade deficit in manufactured goods. 

5 (11) Economists estimate that as a result of 

6 this manipulation of the Chinese currency, the 

7 renminbi is undervalued by between 15 and 40 per8 cent, effectively creating a 15- to 40-percent subsidy 

9 for Chinese exports and giving Chinese manufactur10 ers a significant price advantage over United States 

11 and other competitors. 

12 (12) The national currency of Japan is the yen. 

13 Experts estimate that the yen is undervalued by ap14 proximately 20 percent or more, giving Japanese 

15 manufacturers a significant price advantage over 

16 United States competitors. 

17 (13) In addition to being placed at a competi18 tive disadvantage by foreign competitors’ exports 

19 that are unfairly subsidized by strategically under20 valued currencies, United States manufacturers also 

21 may face significant nontariff barriers to their own 

22 exports to these same countries. For example, in the 

23 past in China, until remediated, a complex system 

24 involving that nation’s value added tax and special 

25 tax rebates ensured that semiconductor devices im-
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1 ported into China were taxed at 17 percent while do2 mestic devices are effectively taxed at 6 percent. 

3 (14) The United States has the right and power 

4 to redress unfair competitive practices in inter5 national trade involving currency manipulation. 

6 (15) Under section 3004 of the Omnibus Trade 

7 and Competitiveness Act of 1988, the Secretary of 

8 the Treasury is required to determine whether any 

9 country is manipulating the rate of exchange be10 tween its currency and the dollar for the purpose of 

11 preventing effective balance of payments adjust12 ments or gaining unfair advantage in international 

13 trade. If such violations are found, the Secretary of 

14 the Treasury is required to undertake negotiations 

15 with any country that has a significant trade sur16 plus. 

17 (16) Article IV of the Articles of Agreement of 

18 the International Monetary Fund prohibits currency 

19 manipulation by a member for the purposes of gain20 ing an unfair competitive advantage over other mem21 bers, and the related surveillance provision defines 

22 ‘‘manipulation’’ to include ‘‘protracted large-scale 

23 intervention in one direction in the exchange mar24 ket’’. 
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1 (17) Under Article XV of the Exchange Agree2 ments of the General Agreement on Tariffs and 

3 Trade, all contracting parties ‘‘shall not, by ex4 change action, frustrate the intent of the provisions 

5 of this Agreement, nor by trade action, the intent of 

6 the Articles of Agreement of the International Mone7 tary Fund’’. Such actions are actionable violations. 

8 The intent of the General Agreement on Tariffs and 

9 Trade Exchange Agreement, as stated in the pre10 amble of that Agreement, includes the objective of 

11 ‘‘entering into reciprocal and mutually advantageous 

12 arrangements directed to substantial reduction of 

13 tariffs and other barriers to trade,’’ and currency 

14 manipulation may constitute a trade barrier disrup15 tive to reciprocal and mutually advantageous trade 

16 arrangements. 

17 (18) Deliberate currency manipulation by na18 tions to significantly undervalue their currencies also 

19 may be interpreted as a violation of the Agreement 

20 on Subsidies and Countervailing Measures of the 

21 World Trade Organization (as described in section 

22 101(d)(12)) of the Uruguay Round Agreements Act, 

23 which could lead to action and remedy under the 

24 World Trade Organization dispute settlement proce25 dures. 
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1 (19) Deliberate, large-scale intervention by gov2 ernments in currency markets to significantly under3 value their currencies may be a nullification and im4 pairment of trade benefits precluded under Article 

5 XXIII of the General Agreement on Tariffs and 

6 Trade, and subject to remedy. 

7 (20) The United States Trade Representative 

8 also has authority to pursue remedial actions under 

9 section 301 of the Trade Act of 1974. 

10 (21) The United States has special rights to 

11 take action to redress market disruption under sec12 tion 406 of the Trade Act of 1974 adopted pursuant 

13 to the provisions of the United States-China Bilat14 eral Agreement on World Trade Organization Acces15 sion. 

16 (22) While large-scale manipulation of cur17 rencies by certain major trading partners to achieve 

18 an unfair competitive advantage is one of the most 

19 pervasive barriers faced by the manufacturing sector 

20 in the United States, other factors are contributing 

21 to the decline of manufacturing and small and mid22 sized manufacturing firms in the United States, in23 cluding but not limited to non-tariff trade barriers, 

24 lax enforcement of existing trade agreements, and 
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1 weak or underutilized government support for trade 

2 promotion. 

3 SEC. 3. NEGOTIATION PERIOD REGARDING CURRENCY NE4 GOTIATIONS. 

5 Beginning on the date of enactment of this Act, the 

6 President shall begin bilateral and multilateral negotia7 tions for a 90-day period with those governments of na8 tions determined to be engaged most egregiously in cur9 rency manipulation, as defined in section 7, to seek a 

10 prompt and orderly end to such currency manipulation 

11 and to ensure that the currencies of these countries are 

12 freely traded on international currency markets, or are es13 tablished at a level that reflects a more appropriate and 

14 accurate market value. The President shall seek support 

15 in this process from international agencies and other na16 tions and regions adversely affected by these currency 

17 practices. 

18 SEC. 4. FINDINGS OF FACT AND REPORT REGARDING CUR19 RENCY MANIPULATION. 

20 (a) IN GENERAL.—During the 90-day negotiation pe21 riod described in section 3, the International Trade Com22 mission shall— 

23 (1) ascertain and develop the full facts and de24 tails concerning how countries have acted to manipu25 late their currencies to increase their exports to the 
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1 United States and limit their imports of United 

2 States products; 

3 (2) quantify the extent of this currency manipu4 lation; 

5 (3) examine in detail how these currency prac6 tices have affected and will continue to affect United 

7 States manufacturers and United States trade levels, 

8 both for imports and exports; 

9 (4) review whether and to what extent reduc10 tion of currency manipulation and the accumulation 

11 of dollar-denominated currency reserves and public 

12 debt instruments might adversely affect United 

13 States interest rates and public debt financing; 

14 (5) make a determination of any and all avail15 able mechanisms for redress under applicable inter16 national trade treaties and agreements, including the 

17 Articles of Agreement of the International Monetary 

18 Fund, the General Agreement on Tariffs and Trade, 

19 the World Trade Organization Agreements, and 

20 United States trade laws; and 

21 (6) undertake other appropriate evaluations of 

22 the issues described in paragraphs (1) through (5). 

23 (b) REPORT.—Not later than 90 days after the date 

24 of enactment of this Act, the International Trade Commis25 sion shall provide a detailed report to the President, the 
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1 United States Trade Representative, the Secretary of the 

2 Treasury, and the appropriate congressional committees 

3 on the findings made as a result of the reviews undertaken 

4 under paragraphs (1) through (6) of subsection (a). 

5 SEC. 5. INSTITUTE PROCEEDINGS REGARDING CURRENCY 

6 MANIPULATION. 

7 At the end of the 90-day negotiation period provided 

8 for in section 3, if agreements are not reached by the 

9 President to promptly end currency manipulation, the 

10 President shall institute proceedings under the relevant 

11 provisions of international law and United States trade 

12 laws including sections 301 and 406 of the Trade Act of 

13 1974 with respect to those countries that, based on the 

14 findings of the International Trade Commission under sec15 tion 4, continue to engage in the most egregious currency 

16 manipulation. In addition to seeking a prompt end to cur17 rency manipulation, the President shall seek appropriate 

18 damages and remedies for the Nation’s manufacturers and 

19 other affected parties. If the President does not institute 

20 action, the President shall, not later than 120 days after 

21 the date of enactment of this Act, provide to the appro22 priate congressional committees a detailed explanation and 

23 accounting of precisely why the President has determined 

24 not to institute action. 
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1 SEC. 6. ADDITIONAL REPORTS AND RECOMMENDATIONS. 

2 (a) NATIONAL SECURITY.—Within 90 days of the 

3 date of enactment of this Act, the Secretary of Defense 

4 shall provide a detailed report to the appropriate congres5 sional committees evaluating the effects on our national 

6 security of countries engaging in significant currency ma7 nipulations, and the effect of such manipulation on critical 

8 manufacturing sectors. 

9 (b) OTHER UNFAIR TRADE PRACTICES.—Within 90 

10 days of the date of enactment of this Act, the United 

11 States Trade Representative and the International Trade 

12 Commission shall evaluate and report in detail to the ap13 propriate congressional committees on other trade prac14 tices and trade barriers by major East Asian trading na15 tions potentially in violation of international trade agree16 ments, including the practice of maintaining a value-added 

17 or other tax regime that effectively discriminates against 

18 imports by underpricing domestically produced goods, or 

19 setting technology standards that effectively limit imports. 

20 (c) TRADE ENFORCEMENT.—Within 90 days of the 

21 date of enactment of this Act, the United States Trade 

22 Representative and the International Trade Commission 

23 shall report in detail to the appropriate congressional com24 mittees on steps that could be taken to significantly im25 prove trade enforcement efforts against unfair trade prac26 tices by competitor trading nations, including making rec-
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1 ommendations for additional support for trade enforce2 ment efforts. 

3 (d) TRADE PROMOTION.—Within 90 days of the date 

4 of enactment of this Act, the Secretaries of State and 

5 Commerce, and the United States Trade Representative, 

6 shall prepare a detailed report with recommendations on 

7 steps that could be undertaken to significantly improve 

8 trade promotion for United States goods and services, in9 cluding recommendations on additional support to improve 

10 trade promotion. 

11 SEC. 7. CURRENCY MANIPULATION DEFINED. 

12 In this Act, the term ‘‘currency manipulation’’ 

13 means— 

14 (1) large-scale manipulation of exchange rates 

15 by a nation in order to gain an unfair competitive 

16 advantage as stated in Article IV of the Articles of 

17 Agreement of the International Monetary Fund and 

18 related surveillance provisions; 

19 (2) sustained, large-scale currency intervention 

20 in one direction, through mandatory foreign ex21 change sales at a nation’s central bank at a fixed ex22 change rate; or 
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1 (3) other mechanisms, used to maintain a cur2 rency at a fixed exchange rate relative to another 

3 currency. 

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