A bipartisan group of U.S. Senators recently introduced the Currency Exchange Rate Oversight Act of 2011.  The bill would provide recourse for U.S. manufacturers adversely affected by China's ongoing currency undervaluation.

Alliance for American Manufacturing (AAM) Executive Director Scott Paul sent a letter to the Senate explaining the importance of this legislation.  Paul made sure to correct some of the misinformation regarding this new legislation.

One misconception that Paul addressed was the claim that tackling China's currency peg might somehow "violate international trade obligations," or that "China would retaliate or start a trade war."

Fact: Taking action to remove protectionist market distortions would not result in a “trade war,” but failing to act will mean that the U.S. has accepted “trade surrender.”

The Senate bill provides consequences for countries that fail to adopt appropriate policies to eliminate currency misalignment and includes tools to address the impact of currency misalignment on U.S. industries. One portion of your bill clarifies existing U.S. trade law to specify that illegal currency rigging should be treated as an actionable subsidy if and when trade cases are brought forward, investigated by the Department of Commerce, and approved by the independent International Trade Commission. Doing so does not mandate sanctions against China or any other nation without proper cause.

When the House of Representatives considered and passed currency legislation last September, Rep. Dave Camp, the Republican Chairman of the House Ways and Means Committee, said that the bill did not “presuppose an outcome,” but rather would send “a clear signal to China that Congress’ patience is running out, without giving China an excuse to take it out on U.S. companies and their workers.”