Currency Manipulation Distorts International Trade, Threatens the International Financial System and Unlawfully Subsidizes Exporters

(Washington, DC, September 21, 2017) The Committee to Support U.S. Trade Laws (CSUSTL) continues to be deeply concerned about foreign government manipulation of currency values and the absence of an enforceable and effective discipline to address it. “Undervalued exchange rates discriminate against U.S. exports and subsidize imports into the U.S. Such manipulation violates the rules of the International Monetary Fund, which unfortunately has no authority to enforce its own rules, as well as the anti-subsidy rules of the World Trade Organization (WTO),” said Skip Hartquist, former Executive Director of CSUSTL, member of the CSUSTL Executive Committee and a partner in Kelley Drye & Warren LLP.

Maintenance of an undervalued exchange-rate regime constitutes a prohibited de facto export subsidy under Articles 1, 2 and 3 of the WTO Subsidies and Countervailing Measures Agreement (SCMA), and Articles VI and XVI of the GATT. Such prohibited export-subsidy schemes are unjustifiable, burden and restrict United States commerce, and deny the United States’ rights under WTO agreements.

In addition to currency manipulation violating international rules of trade, CSUSTL believes the practice also constitutes a countervailable subsidy under U.S. law. Foreign governments subsidize producers when they provide financial assistance to benefit the production, manufacture or exportation of goods. There is an endless variety of such subsidies — including cash payments, credits against taxes, and loans at below-market interest rates. Likewise, currency manipulation operates to keep the cost of input materials at less than fair market value and gives the beneficiary producers an unfair competitive advantage when selling their products in the United States and other countries.

“While CSUSTL has supported legislation to clarify that currency manipulation constitutes a countervailable subsidy, we strongly believe that the Department of Commerce already has the legal authority to use the CVD laws. Using that authority would be an effective way to grant targeted relief to injured U.S. parties, as well as to deter further distortions,” said Thomas M. Sneeringer, CSUSTL President. He added, “We are encouraged that, after many years of resistance by previous officials to applying CVD, the new Administration has sent preliminary signals that it is willing to revisit the issue.”

“CSUSTL respectfully urges the U.S. negotiators in the NAFTA trade agreement discussions, led by Ambassador Robert E. Lighthizer, to press for an enforceable and effective discipline to deter currency manipulation in the updated NAFTA agreement,” said Mr. Hartquist. “That would send a powerful signal to all our trading partners and would serve as a helpful precedent in any bilateral or other trade negotiations to follow,” added Mr. Sneeringer.

The Committee to Support U.S. Trade Laws (“CSUSTL”) is an organization of companies, trade associations, labor unions, law firms, and individuals committed to preserving and enhancing U.S. trade laws and supporting trade policies that benefit the United States-based productive economy. CSUSTL’s members span multiple sectors, including manufacturing, technology, agriculture, mining, energy, and services. We are dedicated to ensuring that the laws against unfair trade are not weakened through legislation or policy decisions in Washington, DC, in international negotiations, or through dispute settlement at the World Trade Organization (WTO) and elsewhere.

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