Protecting American Jobs and Currency Act "PAJC Act"

[Jack]

IN THE SENATE OF THE UNITED STATES

 

Mr. BU of PENNSYLVANIA, for himself and others, introduces the following bill:

 

A BILL
 

To amend title VII of the Tariff Act of 1930 to clarify that countervailing duties may be imposed to address subsidies relating to a fundamentally undervalued currency of any foreign country, and for other purposes.

 

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

 

Section 1. Short Title.

This Act may be cited as the “Protecting American Jobs and Currency Act” or the "PAJC Act".

 

TITLE I - CURRENCY REFOROM FOR TRADE; CURRENCY EXCHANGE RATE TRANSPARENCY

 

Sec. 101. Findings.

Congress makes the following findings:

(1) The strength, vitality, and stability of the United States economy and, more broadly, the openness and effectiveness of the global trading system are critically dependent upon an international monetary regime of orderly and flexible exchange rates.

(2) Increasingly in recent years, a number of foreign governments have undervalued their currencies by means of protracted, large-scale intervention directly or indirectly through surrogates in foreign exchange markets, and this fundamental misalignment has substantially contributed to distortions in trade flows, unsustainable current account imbalances, and serious competitive problems for countries like the United States that permit their currencies to fluctuate in response to changes in market forces.

(3) This exchange depreciation serves as a subsidy for, and facilitates dumping of, exports from countries that engage in this mercantilist practice.

(4) It is consistent with the agreements of the World Trade Organization and the International Monetary Fund that United States trade law be amended to clarify and make explicit that fundamental undervaluation by an exporting country of its currency is actionable as a countervailable export subsidy and alternatively can be offset by antidumping duties when injury to producers and workers in the United States is caused by such subsidized and dumped imports.

 

Sec. 102. Fundamental and Actionable Misalignment of a Currency. 

(a) In General.—Subtitle D of title VII of the Tariff Act of 1930 (19 U.S.C. 1677 et seq.) is amended by inserting after section 771B the following new section:

 

“SEC. 771C. FUNDAMENTAL AND ACTIONABLE MISALIGNMENT OF A CURRENCY.

“(a) Fundamental And Actionable Undervaluation Of A Currency.—For purposes of subsection (c), the currency of an exporting country is fundamentally and actionably undervalued if—

“(1) the real effective exchange rate of the exporting country’s currency is undervalued by at least 5 percent, on average, during an 18-month period that represents the most recent 18 months for which the information required under subsection (c) is reasonably available, but that does not include any time later than the final month in the period of investigation or the period of review, as applicable;

“(2) during part or all of the 18-month period, the government of the exporting country has engaged directly or indirectly through surrogates in protracted, large-scale intervention in foreign exchange markets, and that intervention has involved the direct transfer of funds or the potential direct transfer of funds or liabilities;

“(3) during part or all of the 18-month period, the exporting country has experienced a significant and prolonged global current account surplus;

“(4) during part or all of the 18-month period, the exporting country has experienced a significant and prolonged bilateral current account surplus with the United States; and

“(5) during part or all of the 18-month period, the foreign exchange reserves held or controlled by the government of the exporting country have exceeded the amount necessary to repay its external debt obligations falling due within the coming 12 months, except that the requirement of this paragraph shall not be satisfied and no fundamental and actionable undervaluation shall be found as to the currency of an exporting country if the exporting country during any part of the 18-month period has been allowed under article XII or article XVIII, section B of the GATT 1994 (as defined in section 2(1)(B) of the Uruguay Round Agreements Act (19 U.S.C. 3501(1)(B)) to impose restrictions to safeguard its balance of payments.

“(b) Fundamental And Actionable Overvaluation Of A Currency.—For purposes of subsection (c), the currency of an exporting country is fundamentally and actionably overvalued if—

“(1) the real effective exchange rate of the exporting country’s currency is overvalued by at least 5 percent, on average, during an 18-month period that represents the most recent 18 months for which the information required under subsection (c) is reasonably available, but that does not include any time later than the final month in the period of investigation or the period of review, as applicable;

“(2) during part or all of the 18-month period, the government of the exporting country has engaged directly or indirectly through surrogates in protracted, large-scale intervention in foreign exchange markets, and that intervention has involved the direct transfer of funds or the potential direct transfer of funds or liabilities;

“(3) during part or all of the 18-month period, the exporting country has experienced a significant and prolonged global current account deficit;

“(4) during part or all of the 18-month period, the exporting country has experienced a significant and prolonged bilateral current account deficit with the United States; and

“(5) during part or all of the 18-month period, the foreign exchange reserves held or controlled by the government of the exporting country have been less than the amount necessary to repay its external debt obligations falling due within the coming 12 months, except that the requirement of this paragraph shall not be satisfied and no fundamental and actionable overvaluation shall be found as to the currency of an exporting country if the exporting country during any part of the 18-month period has been allowed under article XII or article XVIII, section B of the GATT 1994 (as defined in section 2(1)(B) of the Uruguay Round Agreements Act (19 U.S.C. 3501(1)(B)) to impose restrictions to safeguard its balance of payments.

“(c) Identification Of Fundamental And Actionable Misalignment Of A Currency.—In calculating under subsection (a) or (b) whether the currency of an exporting country was fundamentally and actionably misaligned during the applicable 18-month period described in such subsection, the administering authority shall—

“(1) measure the level of any such misalignment as the simple average of the results yielded from application of the macroeconomic-balance approach and the equilibrium-real-exchange-rate approach;

“(2) rely upon data that are publicly available, reliable, and compiled and maintained by the International Monetary Fund or the World Bank or, if the International Monetary Fund or the World Bank cannot provide such data, by other international organizations or by national governments;

“(3) for the purposes of the initiation and the preliminary and final determinations of an investigation and for purposes of the preliminary and final results of a review, rely upon data for an 18-month period that represents the most recent 18 months for which the information needed under this subsection is reasonably available at the time, but that does not include any time later than the final month in the period of investigation or the period of review, as applicable;

“(4) use inflation-adjusted, trade-weighted exchange rates;

“(5) implement the macroeconomic-balance approach and the equilibrium-real-exchange-rate approach using the methodologies described in the guidelines of the International Monetary Fund’s Consultative Group on Exchange Rate Issues, whenever possible; and

“(6) in the event that the guidelines of the International Monetary Fund’s Consultative Group on Exchange Rate Issues are not available, employ generally accepted economic and econometric techniques to implement the macroeconomic-balance approach and the equilibrium-real-exchange-rate approach.

“(d) Identification Of Undervaluation Or Overvaluation Of A Currency During The Period Of Investigation Or The Period Of Review.—If fundamental and actionable misalignment within the meaning of subsection (a) or (b) is identified under subsection (c) as to an exporting country’s currency for the applicable 18-month period described in subsection (a) or (b), the administering authority shall—

“(1) calculate for the period of investigation or the period of review, as applicable, the level of undervaluation or overvaluation, as the case may be, of the real effective exchange rate of the exporting country’s currency in accordance with the procedures, methodologies, and standards set forth in subsection (c);

“(2) calculate for the period of investigation or the period of review, as applicable, using the results from each approach described in subsection (c)(1), the level of undervaluation or overvaluation, as the case may be, of the real exchange rate between the exporting country and the United States, deriving such level from each level of undervaluation or overvaluation, as the case may be, of the real effective exchange rate determined under paragraph (1) by allocating appreciations or depreciations, as the case may be, in the bilateral real exchange rates of the exporting country to its trading partners on the basis of the overall current account balances of such trading partners; and

“(3) take the simple average of each level of undervaluation or overvaluation, as the case may be, calculated under paragraph (2) to measure the level of undervaluation or overvaluation, as the case may be, of the bilateral real exchange rate between the exporting country and the United States.

“(e) Consideration Of Undervaluation Of A Currency In Countervailing And Antidumping Duty Proceedings.—If the administering authority determines under subsection (d) that the currency of an exporting country was undervalued in relation to the United States dollar during the period of investigation or the period of review, as applicable—

“(1) in a countervailing duty proceeding, the administering authority shall include in the net countervailable subsidy the amount that reflects the level of undervaluation determined under subsection (d)(3) in the bilateral real exchange rate between the currency of the exporting country and the United States dollar; and

“(2) in an antidumping duty proceeding, the administering authority shall adjust the export price and constructed export price downward by the amount that reflects the level of undervaluation determined under subsection (d)(3) in the bilateral real exchange rate between the currency of the exporting country and the United States dollar.

“(f) Consideration Of Overvaluation Of A Currency In Antidumping Duty Proceedings.—If the administering authority determines under subsection (d) that the currency of an exporting country was overvalued in relation to the United States dollar during the period of investigation or the period of review, as applicable, the administering authority shall adjust the export price and constructed export price upward by the amount that reflects the level of overvaluation determined under subsection (d)(3) in the bilateral real exchange rate between the currency of the exporting country and the United States dollar.

“(g) Type Of Economy.—Any determination with respect to the currency of an exporting country by the administering authority under this section shall be made regardless of whether the exporting country has a market economy, a nonmarket economy, or a combination thereof.

“(h) Definitions.—In this section:

“(1) PROTRACTED, LARGE-SCALE INTERVENTION IN FOREIGN EXCHANGE MARKETS.—

“(A) IN GENERAL.—The term ‘protracted, large-scale intervention in foreign exchange markets’ means involvement in foreign exchange markets by the government of an exporting country, either directly or indirectly through surrogates, in such a way as to contribute significantly to fundamental and actionable misalignment of the currency of the exporting country within the meaning of subsection (a) or (b). Such involvement may include one or more of the following:

“(i) Governmental purchases, sales, or other exchanges of currencies in foreign exchange markets.

“(ii) Requirement by law or policy of the government of the exporting country that some or all of the foreign currency earnings by an exporter or producer in the exporting country be converted into the currency of the exporting country.

“(iii) Any other practice by the government of the exporting country that has the effect of causing fundamental and actionable misalignment of the exchange rate of the exporting country’s currency and that involves the direct transfer of funds or the potential direct transfer of funds or liabilities.

“(B) RULE OF CONSTRUCTION.—Fundamental and actionable misalignment of the currency of an exporting country within the meaning of subsection (a) or (b) shall be attributed to the protracted, large-scale intervention in foreign exchange markets by the government of the exporting country unless it is determined that such intervention was not a significant cause of the fundamental and actionable misalignment.

“(2) MACROECONOMIC-BALANCE APPROACH.—The term ‘macroeconomic-balance approach’ means a methodology under which the level of undervaluation or overvaluation of the real effective exchange rate of the exporting country’s currency is defined as the change in the real effective exchange rate needed to achieve equilibrium in the exporting country’s balance of payments.

“(3) EQUILIBRIUM-REAL-EXCHANGE-RATE APPROACH.—The term ‘equilibrium-real-exchange-rate approach’ means a methodology under which the level of undervaluation or overvaluation of the real effective exchange rate of the exporting country’s currency is defined as the difference between the observed real effective exchange rate and the real effective exchange rate predicted by an econometric model.”.

 

(b) Clerical Amendment.—The table of contents of title VII of the Tariff Act of 1930 is amended by inserting after the item relating to section 771B the following new item:

“Sec. 771C. Fundamental and actionable misalignment of a currency.”.

 

Sec. 103. Clarifications Regarding Definition of Countervailable Subsidy. 

(a) Financial Contribution.—Section 771(5)(D) of the Tariff Act of 1930 (19 U.S.C. 1677(5)(D)) is amended by adding at the end the following new sentence:

“A fundamentally and actionably undervalued currency (as determined under section 771C) constitutes a financial contribution under clause (i).”

(b) Benefit Conferred.—Section 771(5)(E) of the Tariff Act of 1930 (19 U.S.C. 1677(5)(E)) is amended—

(1) in clause (iii), by striking “and” at the end;

(2) in clause (iv), by striking the period at the end and inserting “, and”; and

(3) by inserting after clause (iv) the following new clause:

 

“(v) in the case of a fundamentally and actionably undervalued currency (as determined under section 771C), if the exporter or producer receives or is entitled to receive more of the exporting country’s currency in exchange for the United States dollars paid for the subject merchandise than if the exporting country’s currency were not fundamentally and actionably undervalued.”.

 

(c) Specificity.—Section 771(5A)(B) of the Tariff Act of 1930 (19 U.S.C. 1677(5A)(B)) is amended by adding at the end the following new sentence: “For purposes of this subparagraph, a fundamentally and actionably undervalued currency (as determined under section 771C) constitutes an export subsidy.”.

 

Sec. 104. Clarifications Regarding Dumping. 

(a) Adjustments For Export Price And Constructed Export Price.—Section 772(c) of the Tariff Act of 1930 (19 U.S.C. 1677a(c)) is amended—

(1) in paragraph (1)—

(A) in subparagraph (B) by striking “and” at the end; and

(B) by adding at the end the following new subparagraph:

“(D) the amount that reflects the level of overvaluation in the bilateral real exchange rate between the exporting country and the United States (as determined under section 771C), and”; and

(2) in paragraph (2)—

(A) in subparagraph (A) by striking “and” at the end;

(B) in subparagraph (B), by striking the period at the end and inserting “, and”; and

(C) by adding at the end the following new subparagraph:

 

“(C) the amount that reflects the level of undervaluation in the bilateral real exchange rate between the exporting country and the United States (as determined under section 771C).”.

 

(b) Amendments To Definition Of Nonmarket Economy Country.—Section 771(18)(B) of the Tariff Act of 1930 (19 U.S.C. 1677(18)(B)) is amended—

(1) in clause (v), by striking “and” at the end;

(2) by redesignating clause (vi) as clause (vii); and

(3) by inserting after clause (v) the following new clause:

 

“(vi) whether in the view of the administering authority the currency of the foreign country is fundamentally and actionably undervalued or fundamentally and actionably overvalued (as determined under section 771C), and”.

 

Sec. 105. Application to Goods From Canada and Mexico. 

Pursuant to article 1902 of the North American Free Trade Agreement and section 408 of the North American Free Trade Agreement Implementation Act of 1993 (19 U.S.C. 3438), the amendments made by this Act shall apply with respect to goods from Canada and Mexico.

 

Sec. 106. Limitations on Bills Implementing Trade Agreements.

(a) In General.—Notwithstanding section 151 of the Trade Act of 1974 (19 U.S.C. 2191) or any other provision of law, any bill implementing a trade agreement between the United States and another country (or extending permanent normal trade relations) shall be subject to a point of order pursuant to subsection (c) unless—

(1) the bill is accompanied by a Presidential certification described in subsection (b); and

(2) the bill contains a provision approving that certification.

(b) Certification.—

(1) IN GENERAL.—A certification described in this subsection means a certification submitted by the President to the Congress that, in the 10-year period preceding the certification, the government of a country described in paragraph (2) has not engaged in the intervention or manipulation of the rate of exchange between that country's currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.

(2) COUNTRY DESCRIBED.—A country described in this paragraph is a country—

(A) with respect to which the United States is entering into a trade agreement; or

(B) with respect to which the United States is extending permanent normal trade relations

(c) Point Of Order In Senate.—

(1) IN GENERAL.—The Senate shall cease consideration of a bill to implement a trade agreement (or to extend permanent normal trade relations), if—

(A) a point of order is made by any Senator against the bill because the bill is not accompanied by a certification described in subsection (b); and

(B) the point of order is sustained by the presiding officer.

(2) WAIVERS AND APPEALS.—

(A) WAIVERS.—Before the presiding officer rules on a point of order described in paragraph (1), any Senator may move to waive the point of order and the motion to waive shall not be subject to amendment. A point of order described in paragraph (1) is waived only by the affirmative vote of a majority of the Members of the Senate, duly chosen and sworn.

(B) APPEALS.—After the presiding officer rules on a point of order under this paragraph, any Senator may appeal the ruling of the presiding officer on the point of order as it applies to some or all of the provisions on which the presiding officer ruled. A ruling of the presiding officer on a point of order described in paragraph (1) is sustained unless a majority of the Members of the Senate, duly chosen and sworn, vote not to sustain the ruling.

(C) DEBATE.—Debate on a motion to waive under subparagraph (A) or on an appeal of the ruling of the presiding officer under subparagraph (B) shall be limited to 1 hour. The time shall be equally divided between, and controlled by, the majority leader and the minority leader of the Senate, or their designees.

 

TITLE II - CHINESE CURRENCY ACCOUNTABILITY

with thanks to Mr. Davidson

 

Sec. 201. Opposition of the United States to an increase in the weight of the Chinese renminbi in the Special Drawing Rights basket of the International Monetary Fund.

The Secretary of the Treasury shall instruct the United States Governor of, and the United States Executive Director at, the International Monetary Fund to use the voice and vote of the United States to oppose any increase in the weight of the Chinese renminbi in the basket of currencies used to determine the value of Special Drawing Rights, unless the Secretary of the Treasury has submitted to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a written report which includes a certification that—

(1) the People’s Republic of China is in compliance with all its obligations under Article VIII of the Articles of Agreement of the Fund;

(2) in the preceding 12 months, there has not been a report submitted under section 3005 of the Omnibus Trade and Competitiveness Act of 1988 or section 701 of the Trade Facilitation and Trade Enforcement Act of 2015 in which the People’s Republic of China has been found to have manipulated its currency;

(3)

the People’s Republic of China has instituted and is implementing the policies and practices necessary to ensure that the renminbi is freely usable (within the meaning of Article XXX(f) of the Articles of Agreement of the Fund); and

(4) the People’s Republic of China adheres to the rules and principles of the Paris Club and the OECD Arrangement on Officially Supported Export Credits.

 

 

Sec. 202. Sunset

Section 201 shall have no force or effect beginning 10 years after the date of the enactment of this Act.

 

TITLE III - 21ST CENTURY DOLLAR

with thanks to Mr. Hill

 

Sec. 301. Statement of United States policy regarding the dollar

It is the policy of the United States to facilitate the position of the dollar as the primary global reserve currency, including through vigorous support of—

(1) deep, open, and transparent financial markets;

(2) continuous improvements to domestic and international payment methods that facilitate dollar transactions;

(3) sound macroeconomic governance and a rules-based system of international trade; and

(4) clear and realistic objectives in the deployment of financial restrictions arising from national security considerations.

 

Sec. 302. Report on dollar strategy

(a) In general.--The Secretary of the Treasury (in this Act referred to as the Secretary) shall establish a strategy that implements the policy described in section 2.

(b) Consultation.--The Secretary shall, as appropriate, consult with the Board of Governors of the Federal Reserve System when establishing the strategy pursuant to subsection (a). 

(c) Report.--Not later than 180 days after the date of the enactment of this section, the Secretary shall submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a report that describes—

(1) the strategy established by the Secretary pursuant to subsection (a);

(2) key measures taken by the Secretary to implement the strategy; 

(3) any legislative recommendations that would strengthen the ability of the United States to advance the policy described in section 2;

(4) a description of efforts by major foreign central banks, including the People’s Bank of China, to create an official digital currency, as well as any risks to the national interest of the United States posed by such efforts;

(5) the status of efforts to assess or develop an official United States digital currency by the Board of Governors of the Federal Reserve System; and

(6) any implications for the strategy established by the Secretary pursuant to subsection (a) arising from the relative state of development of an official digital currency by the United States and other nations, including the People’s Republic of China.

(d) Renminbi assessment.--The report described in subsection (c) shall—

(1) evaluate the role of the renminbi in international payments and foreign exchange reserves;

(2) assess currency-related policies in China, including—

(A) the provision of Chinese government-backed assets;

(B) the extension of credit abroad by the Chinese government; and

(C) the development of cross-border payment systems as tools to advance strategic objectives of the government of the People’s Republic of China; and

(3) recommend policy options aimed at mitigating medium-term and long-term risks to the national interest of the United States that may arise as a result of the internationalization of the renminbi.

(e) Annual updates.--After submitting an initial report in accordance with subsection (c), the Secretary shall submit, to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, an updated version of such report each year.

 

Sec. 303. Sunset.

 

Section 302 shall have no force or effect after the date that is 7 years after the date of the enactment of this Act.

 

Plain English Summary

Sec. 102. Fundamental and Actionable Misalignment of a Currency. 

• Amends the Tariff Act of 1930 to include as a "countervailable subsidy" requiring action under a countervailing duty or antidumping duty proceeding the benefit conferred on merchandise imported into the United States from foreign countries with fundamentally undervalued currency.
• Defines "benefit conferred," in cases where the currency of a foreign country is exchanged for foreign currency (i.e., U.S. dollars) obtained from export transactions, as the difference between: (1) the amount of currency provided by a foreign country in which the subject merchandise is produced; and (2) the amount of currency such country would have provided if the real effective exchange rate of its currency were not fundamentally undervalued.
• Declares that the fact that such a subsidy is also provided in circumstances not involving export shall not, for that reason alone, mean it cannot be considered export contingent and actionable under a countervailing duty and antidumping duty proceeding.
• Requires the administering authority to determine that the currency of a foreign country is fundamentally undervalued if for an 18-month period: (1) the government of the country engages in protracted, large-scale intervention in one or more foreign exchange markets; (2) the country's real effective exchange rate is undervalued by at least 5%; (3) the country has experienced significant and persistent global current account surpluses; and (4) the country's government has foreign asset reserves exceeding the amount necessary to repay all its debt obligations falling due within the coming 12 months, 20% percent of the country's money supply, and the value of the country's imports during the previous 4 months.
• Requires the use, for calculating a country's "real effective exchange rate undervaluation," of certain guidelines of the Consultative Group on Exchange Rate Issues of the International Monetary Fund (IMF) or, if those guidelines are not available, generally accepted economic and econometric techniques and methodologies. Requires the use, also, of inflation-adjusted, trade-weighted exchange rates.

Sec. 103. Clarifications Regarding Definition of Countervailable Subsidy. 

• Directs the Comptroller General to report to Congress on the implementation of this Act.

Sec. 104. Clarifications Regarding Dumping. 

• Requires the use, for calculating a country's "real effective exchange rate undervaluation," of certain guidelines of the Consultative Group on Exchange Rate Issues of the International Monetary Fund or, if those guidelines are not available, generally accepted economic and econometric techniques and methodologies. Requires the use, also, of inflation-adjusted, trade-weighted exchange rates.

Sec. 105. Application to Goods from Canada and Mexico.

• Applies the amendments made by this Act to goods from Canada and Mexico.

Sec. 106. Limitations on Bills Implementing Trade Agreements.

• Subjects any bill implementing a trade agreement between the United States and another country (or extending permanent normal trade relations) of order unless the bill is accompanied by a Presidential certification, approved by Congress, stating that, in the 10 years prior to the certification, the government of the country has not engaged in the intervention or manipulation of the rate of exchange between its currency and the U.S. dollar in order to prevent effective balance of payments adjustments or gain unfair competitive advantage in international trade.

Sec. 201. Opposition of the United States to an increase in the weight of the Chinese renminbi in the Special Drawing Rights basket of the International Monetary Fund.

 

• This bill requires the United States to oppose, absent specified conditions, any increase in the weight of Chinese currency (i.e., the renminbi) in the basket of currencies used to determine the value of Special Drawing Rights. Special Drawing Rights are a currency support tool available to members of the International Monetary Fund (IMF).
• Specifically, the Department of the Treasury must instruct certain U.S. officials at the IMF to oppose any such increase unless Treasury has certified that (1) China is in compliance with all general obligations of members of the IMF, (2) China has not been found to have manipulated its currency in the preceding 12 months, and (3) China is implementing policies and practices necessary to ensure that the renminbi is freely usable.

Sec. 301. Statement of United States policy regarding the dollar

This bill requires the Department of the Treasury to establish a strategy to facilitate the position of the dollar as the primary global reserve currency.

Sec. 302. Report on dollar strategy

Treasury must submit a report that includes (1) steps taken to implement this strategy, legislative recommendations, and efforts by major foreign central banks to create an official digital currency; and (2) an evaluation of the role of the renminbi (the official currency of China) in international payments and foreign exchange reserves.