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House Committee Pulls Teeth out of China currency bill
Howard Richman, 9/25/2010

On Friday September 24, the House Ways and Means Committee pulled the teeth out of the Currency Reform for Fair Trade Act (HR 2378) and then passed it out of committee. Rep. Timothy Ryan's (D, OH) bill would have required that the Obama administration (through the Commerce Department) place tariffs on goods produced by a currency-manipulating country when deciding industry-by-industry anti-dumping and countervailing duty suits. The bill, after passage of Committee Chairman Sander Levin's (D, MI) amendment makes such duties completely voluntary. Here's how the committee's report summarizes this change:

Importantly, the amended bill does not legislatively "deem" that a finding of fundamental currency undervaluation satisfies the requirement of export contingency, as the original bill did. With the elimination of this requirement, as well as other changes, the amended bill avoids the WTO vulnerabilities that may have been attributed to earlier versions of the legislation.

Whether or not this bill passes, the Obama administration will occasionally apply tariffs to some Chinese products, as when Obama imposed 35% tariffs on Chinese tires just before he spoke to the AFL-CIO last September.  In return, China will place tit-for-tat tariffs on American products, as when China placed tariffs of up to 105% on American chicken products in February and raised their tariffs on some U.S. nylon products from 36.2% to 96.5% in April.

House Democrats claimed that they needed to weaken Ryan's bill so that any countervailing duties imposed under it would have a better chance of standing up to WTO scrutiny. But if the Democrats wanted to strengthen the bill, not weaken it. they could have imposed across-the-board tariffs on mercantilist products under the WTO rule which lets trade deficit countries balance trade. In a recent commentary which has already been linked to over 4,000 times (How to Win the Trade War with the Democrats), we recommended that Republican candidates advocate such effective measures.

Evidently, the purpose of this bill is to let House Democrats pretend that they are doing something about Chinese currency manipulations, when in reality they are simply going along with a Democratic administration that is refusing to do anything that would be effective. What was needed was a scaled tariff bill that would have balanced our trade with those countries that are intentionally keeping our trade out of balance.

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