U.S. Weighs Letting Companies Seek New Penalties Over Currency Manipulation
May 24 2019 - 6:09PM
Dow Jones News
By Josh Zumbrun
U.S. companies would be able to seek penalties against foreign
competitors they say benefit from artificially weak currencies,
under a new rule proposed by the Trump administration.
The proposal -- on which the Commerce Department is now seeking
public comment -- would treat an undervalued currency as a subsidy
that allows foreign businesses to export their goods more cheaply.
The rule would allow U.S. companies to file a complaint with the
U.S. International Trade Commission, the first stop in arguing for
countervailing duties that could lead to additional tariffs on
certain imports.
Currently, companies can't cite currency weakness in claims of
improper foreign subsidization of their competitors.
Commerce Secretary Wilbur Ross said the measure adds to the
administration's arsenal in fighting foreign-currency manipulation,
which the Trump administration says hurts American industry.
"This change puts foreign exporters on notice that the
Department of Commerce can countervail currency subsidies that harm
U.S. industries," Mr. Ross said. "Foreign nations would no longer
be able to use currency policies to the disadvantage of American
workers and businesses.
The Trump administration's criticism of currency manipulation
has primarily targeted China. Before their trade talks reached an
impasse this month, the U.S. and China had negotiated terms that
would force Beijing to disclose more information about its currency
activities and to commit to refrain from undervaluing the yuan.
A Commerce Department spokesman didn't respond to questions
about the extent to which the latest proposal was aimed at China.
As written, the proposal would apply to any country found to have a
currency that is artificially weak.
"It is welcome news to see Commerce working through a process
where parties can address such things," said Terence Stewart,
managing partner of Stewart and Stewart, who specializes on
trade-remedy cases.
Mr. Stewart, however, said that while many companies would
welcome the ability to include alleged currency manipulation in
their cases, the rule's overall impact could be small.
The Commerce Department said in its proposal that it expected
only a few additional countervailing-duty cases to be filed each
year under the new rule, and for duties assessed to amount to
between $4 million and $21 million a year. Also,
countervailing-duty cases apply only to a small slice of U.S.
trade.
While companies may welcome the ability to bring such claims,
they also may face an arduous legal process before any
determinations are made or tariffs are imposed.
The complexity of the issue presents a challenge for bringing
cases, said Mark Sobel, a former U.S. Treasury official who worked
on currency valuations. Exchange rates are influenced by a range of
factors, including fiscal policies, trade and regulatory policies,
capital flows and monetary policies, he noted, adding that there is
no easy or straightforward measure of a "fair" exchange rate. And
all those factors also could change while a case is going through
the legal system.
China wouldn't necessarily meet the criteria for manipulation
right now. Over the past two years, in its semiannual review of
currency practices among all nations, the Treasury Department has
repeatedly determined that China hasn't been manipulating its
currency. Under the proposed process, the Treasury Department would
weigh in on whether a currency is being manipulated, but would not
necessarily be the final arbiter.
One sign of an unbalanced currency is when a country has a large
current-account surplus, meaning that its exports far exceed its
imports. While this was the case with China a decade ago, China's
overall surplus is now small, according to the Treasury Department.
Nations with bigger current-account surpluses include Japan, South
Korea, Switzerland and Taiwan.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
May 24, 2019 17:54 ET (21:54 GMT)
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