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FACTBOX: Details of US Senate Finance currency bill

WASHINGTON: The Senate Finance Committee voted on Thursday on a bill to give the US Treasury Department new tools to pressure countries with “fundamentally misaligned currencies.”

* The legislation is directed primarily at China, although no country is mentioned by name. It must be approved by the full Senate and the House of Representatives and signed by President George W. Bush to become law.

Here are key provisions:

FIRST STEPS

* The bill repeals current law requiring the Treasury Department to identify countries that manipulate their currency for a trade advantage and requires Treasury instead to identify countries with fundamentally misaligned currencies.

* The Treasury is instructed to consult with the Federal Reserve chairman and a new nine-member private sector advisory committee in preparing a semi-annual report, scheduled for release March 15 and Sept 15.

* The bill requires Treasury to identify misaligned currencies as a ‘priority’ concern if a foreign government is engaged in certain actions. Those include large-scale, one-way intervention in the currency exchange market; prolonged accumulation of foreign assets for balance of payment purposes, and use of currency controls inconsistent with the goal of achieving full currency convertibility.

* The bill requires Treasury to seek consultations with any country deemed to have a fundamentally misaligned currency and requires additional steps for priority countries.

* Those include seeking the help of the International Monetary Fund and other governments in pressuring the priority country to eliminate the currency misalignment.

PENALTIES FOR INACTION

* The bill imposes penalties on priority countries that have not adopted appropriate policies to eliminate currency misalignment within 90 days.

* That includes requiring the Commerce Department to impose higher duties in anti-dumping investigations against goods from priority countries to offset the currency misalignment.

* It also would bar access to the US government procurement market for any country that is not a member of the World Trade Organization’s government procurement agreement. China is currently not a member of that pact.

* The bill requires the Treasury secretary to ask the IMF managing director to consult with the priority country on whether it is honoring its IMF obligations and report the results of its talks within 180 days.

* It also bars the priority country from US Overseas Private Investment Corp financing for projects in the country, and instructs the Treasury to oppose other financing offered by various multilateral banks.

* The bill steps up pressure if the currency remains fundamentally misaligned after 360 days.

* It requires the United States to initiate dispute settlement proceedings at the WTO and instructs Treasury to consult with the Federal Reserve on remedial intervention in international currency markets against the fundamentally misaligned foreign currency.

PRESIDENTIAL WAIVER

* The president can waive any of the actions against the priority country if he or she determines the action would seriously harm national security or the vital economic interests of the United States.

* The bill allows Congress to overturn waivers to protect US economic interests, but not for national security. reuters

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