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By C. Randall Henning

The dispute over chinese language trade cost coverage in the usa has generated a chain of legislative proposals to limit the discretion of the united states Treasury division in choosing foreign money manipulation and to reform the department's responsibility to the Congress. This research stories the Treasury's stories to the Congress on alternate fee coverage brought via the 1988 alternate act and Congress's remedy of them. It reveals that the responsibility method has usually now not labored good in perform: The insurance of the stories has occasionally been incomplete and never supplied a adequate foundation for congressional oversight. Nor has Congress continuously played its personal function good, keeping hearings on below half the reviews and overlooking vital major matters. numerous suggestions can enhance assistance to the Treasury, criteria for evaluate, and congressional oversight. those contain (1) refining the standards used to figure out forex manipulation and writing them into legislation; (2) explicitly harnessing US judgements on manipulation to the IMF's ideas on alternate charges; (3) clarifying the overall goals people trade fee coverage; (4) reaffirming the mandate to hunt overseas macroeconomic and foreign money cooperation; and (5) institutionalizing multicommittee oversight of alternate cost coverage via Congress. As they improve laws concentrating on manipulation, additionally, legislators are usually not lose sight of the wider reasons of the 1988 act with regards to the potent valuation of the buck, the present account, and their ramifications for the united states financial system total.

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The North American Free Trade Agreement (NAFTA), negotiated by the George H. W. Bush administration and passed by Congress during the Bill Clinton administration, had been the most widely debated trade measure in the United States since World War II. 5. See also the tabulation of rationales in GAO (2005, appendix III). 34 ACCOUNTABILITY AND OVERSIGHT OF US EXCHANGE RATES ch04_15047_Peterson_Henning 6/3/08 9:00 PM Page 35 The Mexican peso crisis of 1994–95 threatened political support in the United States for this agreement, and Congress was called upon to fund the largest-ever financial rescue package.

Third, members of Congress proposed legislation that would require the Treasury and Federal Reserve to address the exchange rate. Such legislation went through two phases. The first set of bills would have required these agencies to intervene in the foreign exchange market in prescribed amounts to depress the value of the dollar. These bills were impractical, but they forced the administration to take the sentiments of the Congress on this issue seriously. The chairman of the Ways and Means Committee, Dan Rostenkowski (D-IL), proposed an “exchange rate equalization tariff” directed at newly industrialized economies (NIEs) that maintained undervalued currencies—a precursor to similar bills before the present Congress.

A broadening of the exchange rate policy process, they fear, could some day induce policymakers to push the exchange rate away from equilibrium rather than toward it. ” They absolve the Treasury of protectionism when it has cited countries for manipulation in the past, on the proposition that it was acting under pressure from Congress. Frankel and Wei note with approval that the White House considers a broader set of effects when making policy than does Congress. I. M. Destler and I (Destler and Henning 1989), by contrast, argue that Congress played a constructive role during the mid-1980s, intermediating between private-sector activism and executive neglect, and helping to produce a needed shift in exchange rate policy by the second Reagan administration.

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