15 Senators Want Currency Manipulation Included in CV Investigation of China Paper
On February 25, 2010, a bipartisan group of 15 Senators, led by Senator Schumer (D), sent a letter to Commerce Secretary Locke expressing their serious concern that the Commerce Department has failed to properly consider allegations that China's manipulation of its currency is a countervailable subsidy.
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Commerce Should Investigate China Currency Manipulation in Paper CV Case
According to the Senators, U.S. manufacturers have filed at least 12 separate allegations - most recently on January 13, 2010 in the Coated Paper investigation - that the Chinese government is actively engaged in keeping the value of its currency artificially low to promote the growth of export-oriented industries.
The Senators urged Commerce to properly consider the currency manipulation allegation in the coated paper investigation and the information provided by petitioners in determining whether to investigate China's actions.
Investigation Would Set Valuable Precedent, Could Lead to Reform
According to a press release by Senator Schumer's office, experts believe that the domestic industry in the paper case have provided sufficient evidence such that the Commerce Department is required by law to investigate whether China's currency manipulation is a countervailable subsidy.
If Commerce agrees to investigate the Chinese government's actions on currency in this particular case, the group believes that the results of the investigation could then be cited in other cases alleging that currency manipulation is a subsidy. Schumer's press release states that this could ultimately lead to a situation where duties are placed on a wide range of Chinese products and ultimately cause China to reform its currency practices.
Commerce has "Flawed Interpretation" of Subsidy Allegations
The group of 15 Senators believes that Commerce's failure to investigate China's actions regarding its currency derives from a "flawed interpretation" of the legal standard for the Department's assessment of a subsidy allegation.
According to the Senators, Secretary Locke's previous explanation that Commerce considers "whether there is a financial contribution that is specific to an industry or group of industries which confers a benefit" (emphasis added) is not the statutory standard for assessment of a subsidy allegation.
They believe that a subsidy allegation need not prove the elements of the financial contribution, benefit and specificity. Rather, the law requires that Commerce initiate an investigation to determine whether a countervailable subsidy is being provided if the domestic industry "alleges" the elements necessary for the imposition of a countervailing duty and provides "information reasonably available" to the domestic industry supporting the allegations.
(Note that the World Trade Organization's Subsidies Agreement requires that subsidies include a financial contribution, confer a benefit, and are specific in order to be countervailable.)
Group Says Investigating Currency Manipulation Has Precedent
The Senators state that they are aware of previously investigated currency-related subsidy allegations in at least three other countervailing duty proceedings involving Mexico, Germany and Uruguay. Therefore, Commerce knows how to apply the "correct" legal standard for assessment of a subsidy allegation and has the authority under current law to investigate the most recent series of subsidy allegations involving China's currency manipulation.
(See ITT's Online Archives or 11/23/09 news, 09112325, for BP summary of the U.S.-China Economic and Security Review Commission's assessment that the U.S. should be more aggressive with China on currency manipulation, etc.
See ITT's Online Archives or 04/17/09 news, 09041710, for BP summary of Treasury submitting its semi-annual report to Congress on international exchange rate policies which found no major partner, including China, was manipulating its currency.)
Schumer press release with Congressional letter (dated 02/25/10) available at http://schumer.senate.gov/record.cfm?id=322549&
WTO information on the AD Agreement and subsidies available at http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htmsubsidies