By almost a 2:1 margin, a bipartisan group of senators last week passed the Currency Exchange Rate Oversight Reform Act of 2011, legislation which should crack down on China’s artificial under-valuation of its currency and level the playing field for U.S. importers and exporters. The measure now goes before the House, where support is mixed.

House Speaker John Boehner (R-OH) has said in statements that the United States should not dictate currency policy for another country and that he will oppose attempts to bring this bill to the floor for vote. This comes despite the fact that the similar Currency Reform for Fair Trade Acts, sponsored by Rep. Sander Levin (D-MI) earlier this year, had the support of 225 bipartisan congressmen.

President Obama hasn’t yet publicly stated his position on the Senate measure. But with our trade deficit to China soaring to a record $29 billion in August, after reaching $273 billion last year, and many economists saying China’s currency is undervalued by 25-40% — something has to be done.

“There are always people who don’t want to stand up to China, and I think they are, frankly, undercutting our ability to stop the hemorrhaging in our manufacturing jobs,” the bill’s sponsor, Sen. Sherrod Brown (D-OH) said in a statement. And on the Senate website, in announcing the 63-35 vote, it states: “China’s currency manipulation has already cost 3 million American jobs — 2 million of which came from our manufacturing sector. The bill that passed [Oct. 11] could create 1.6 million American jobs.

How will it help? Key points of the The Currency Exchange Rate Oversight Reform Act of 2011 include:

• Improves the oversight of the currency exchange rate by the Treasury.

• Clarifies the countervailing duty law to address currency under-evaluation.

• States that Commerce may not refuse to investigate a subsidy allegation. This clarification is supported by the WTO’s Appellate Body and is a key element in the previous Brown-Snowe currency bill and in HR 2378, which passed in September 2010.

• Triggers a series of consequences, including:

Immediate: “consider designation of a country’s currency as a ‘priority’ currency when determining whether to grant the country ‘market economy’ status for purpose of U.S. antidumping law.”

After 90 days: “forbid federal procurement of goods and services from the designated country unless that country is a member of the WTO Government Procurement Agreement,” and “forbid Overseas Private Investment Corporation financing or insurance for projects in the designated country.”

After 360 days and failure to adopt appropriate policies: “The administration must require the U.S. Trade Representative to request dispute settlement consultations in the World Trade Organization with the government responsible for the currency,” and “require the Department of Treasury to consult with the Federal Reserve Board and other central banks to consider remedial intervention in currency markets.”

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