Sign our petition to help support the legislative bill introduced by Senator Baldwin & Senator Hawley. Let's continue to tell Congress and the Trump administration to eliminate the US trade deficit by fixing our overvalued dollar. An overvalued dollar makes American goods and services less competitive in global markets. The Competitive Dollar for Jobs and Prosperity Act will create good jobs, rebalance trade and rebuild American prosperity.
Robert E. Scott, Senior Economist and Director of Trade and Manufacturing Policy Research, Economic Policy Institute (EPI)
“Over the past two decades, massive currency manipulation and trillions of dollars in private capital inflows have driven up the value of the US dollar. This overvalued dollar has been the principal cause of 5 million good U.S. manufacturing jobs lost, and nearly 90,000 factories closed. The ‘strong dollar’ favored by Wall Street has depressed the prices of American-made steel and aluminum, as well as corn, soybeans, and countless other products, pushing tens of thousands of firms and family farms out of business. A small, carefully managed tax on foreign purchases of U.S. stocks, bonds, and other assets would lower the dollar’s value by 25 to 30 percent. That would eliminate U.S. trade deficits, create millions of new manufacturing jobs, and restore the health of American family farms.”
Skip Hartquist, President & General Counsel, Copper & Brass Fabricators Council:
"Currency misalignment is the trade-distorting measure American copper and brass fabricators unanimously and persistently raise as a major cause of the unfair competition they face in the global marketplace. The Competitive Dollar for Jobs and Prosperity Act would provide a much needed tool to counter the injurious effects of currency intervention, manipulation and foreign government subsidized imports on U.S. manufacturers."
M. Brian O’Shaughnessy, Chairman, Revere Copper Products, Rome NY:
"Revere produces copper sheet, strip, coil and bus bar which are shipped mostly to domestic manufacturing facilities for further fabrication. The misalignment of the overvalued US dollar is the single most detrimental factor that has led to imports supplying as much as 22% of our domestic markets and causing the offshoring of 30% of our customer base since 2000. These imports are coming in from Mexico, Asia, South America and Europe—the MAC is a tool that does not pick winners and losers but will significantly improve the competitiveness of Revere against all foreign competitors."
Joseph Gagnon, Senior Fellow, Peterson Institute for International Economics:
"The United States should abandon the strong dollar policy in favor of a sensible dollar policy aimed at avoiding large and persistent trade imbalances. The right tools for the job are foreign exchange intervention and taxation of foreign capital, including through a flexible market access charge."
Kevin Kelley, President Rochester Technology and Manufacturing Assn, Rochester NY:
"The Rochester Technology and Manufacturing Association strongly supports the Competitive Dollar for Jobs and Prosperity Act (CDJPA). Our member manufacturers are globally competitive, but their profitability and workers are harmed when foreign capital inflows drive the dollar price above competitive levels. The CDJPA provides the goals and tools essential for our members to grow their businesses and their employment in the future. It is long overdue."
Bill Bullard, CEO, Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF USA):
"America’s largest agricultural sector, the U.S. cattle industry, is highly sensitive to import surges. With an overvalued dollar, multinational meatpackers source more cattle and beef from foreign countries, which limits demand for domestic cattle raised by America’s farmers and ranchers. The MAC will end the artificial advantage enjoyed by foreign countries and exploited by multinational meatpackers by eliminating the currency distortions associated with other countries devalued currency and the United States’ overvalued dollar."
Roger Johnson, President, National Farmers Union:
“The over-valued U.S. dollar puts American family farmers and ranchers on an uneven playing field with the rest of the world. Despite near record levels of agricultural exports, U.S. farmers and ranchers are now in the sixth year of depressed farm income, and low commodity prices are a big part of the problem. If the U.S. dollar were realigned, our agricultural exports would be more competitive on the world market, driving up prices. The Competitive Dollar for Jobs and Prosperity Act is needed to restore fairness to international trade markets and to provide opportunity for economic prosperity for family farmers and ranchers, and all of rural America.”-National Farmers Union President Roger Johnson
An Explanation of The Competitive Dollar for Jobs and Prosperity Act
President Trump’s recent tariff actions are one way of addressing America’s trade imbalances and industrial decline. But currency exchange rates are a more powerful driver of trade surpluses and deficits, and a greater obstacle to increased US production. Currently, persistent US dollar overvaluation causes much of America’s multilateral trade deficit—with an overvalued dollar raising the price of US goods and services in global markets. While the United States has an array of fiscal and monetary tools to manage its internal economy, it lacks effective exchange rate management tools to manage trade flows that have a powerful effect on the domestic economy.
The Competitive Dollar for Jobs and Prosperity Act provides these tools as well as standards that govern their use.
Exchange Rates and Global Trade Balances
Flexible exchange rates should adjust automatically to levels that balance trade. Unfortunately for the United States, this mechanism has been disrupted for many years, raising the value of the dollar far above its trade-balancing price.
First, global capital flows are increasingly dominated by private sector financial transactions. As issuer of the world’s most sought-after currency, the US consistently attracts large net inflows of foreign capital. This large net foreign demand for dollars and dollar-denominated assets drives up the dollar’s value, raising the price of US goods and making them less competitive in US and foreign markets. Imports surge into the US because they are artificially cheap, displacing American-made products and services. US exports become too expensive for foreign buyers.
The other cause of an overvalued US dollar is currency manipulation—when the governments of other countries hoard dollars received for their exports rather than exchange them. China, Japan, and South Korea have grown to be manufacturing powerhouses at US expense in large part due to such currency manipulation.
The US needs the tools to deal with both mercantilist tactics and excessive, private capital inflows.
Competitive Dollar for Jobs and Prosperity Act
The Competitive Dollar for Jobs and Prosperity Act would task the Federal Reserve with achieving and maintaining a current account balancing price for the dollar within five years. It would create an exchange rate management tool in the form of a Market Access Charge (MAC)—a variable fee on incoming foreign capital flows used to purchase dollar assets. The Fed would set and adjust the MAC rate. The Treasury Department would collect the MAC revenue. The result would be a gradual move for the dollar toward a trade-balancing exchange rate. The legislation would also authorize the Federal Reserve to engage in countervailing currency intervention when other nations manipulate their currencies to gain an unfair trade advantage.
Key Parts of the Competitive Dollar for Jobs and Prosperity Act (CDJPA)
The CDJPA does these things:
1. Amends the Federal Reserve Act to add a third mandate—achieving a current account balance—to the existing, dual mandate of the Fed for full employment and price stability.
2. Creates an exchange rate management tool called the Market Access Charge (MAC) on “covered transactions” to gradually achieve and maintain a trade-balancing price for the US dollar.
2.1 Instructs the Fed to set and adjust the MAC, moving it higher or lower as needed, to moderate incoming capital flows and achieve a current account balance.
2.2 Allows the Fed to consider impacts on US economic output, employment, interest rates, and markets in setting and adjusting the MAC.
3. Defines Covered Transactions as all foreign purchases of securities and other US assets denominated in USD.
4. Tasks the Treasury with administering the collection of the MAC
5. Allows the Fed to engage in countervailing currency intervention to neutralize currency manipulation by other countries.
The CDJPA provides the missing tools America needs to defend its industries, workers, farmers, and ranchers from incoming foreign capital that weaponizes the dollar against domestic manufacturers and agricultural producers. The CDJPA would re-establish the dollar’s connection with a trade-balancing price, increase exports, create good paying jobs, and achieve broadly shared prosperity.
An Explanation of the Competitive Dollar for Jobs and Prosperity Act
The Competitive Dollar for Jobs and Prosperity Act would task the Federal Reserve with achieving and maintaining current account balance and give it the tools to achieve that goal. These tools are designed to neutralize the excessive private capital inflows and currency manipulation by foreign governments that drive up the US dollar, making American goods and services less competitive in foreign and US markets and increasing the trade deficit.
America’s persistent ongoing trade deficit is finally being recognized as a significant economic and political problem.
Trade enforcement and tariff action are now being used to address issues of national security (section 232, 1962 Trade Expansion Act), intellectual property theft (section 301, 1974 Trade Act), and serious industry harm (section 201, 1974 Trade Act). Such tariffs can effectively remedy sector-specific trade impediments, manage the composition of US trade, and, if applied to a sufficiently large percentage of imports from a particular country, remedy bilateral trade imbalances.
However, tariffs alone cannot lower the value of the dollar enough to balance trade overall. Why? Because when tariffs reduce imports, they create upward pressure on the USD exchange rate. This results in reduced US exports and more imports in sectors and from countries not subject to tariffs, thus offsetting most of the effect of the tariffs on the overall balance of trade.
To reduce and eliminate its trade deficit America needs other, more direct ways to manage the dollar’s exchange rate. Without it, our economy is subject to the actions of both foreign governments and private sector actors who want to accumulate more dollar assets.
Foreign central banks and sovereign funds often accumulate dollar reserves to protect themselves from capital market pressures or to gain a trade advantage by holding down the value of their currencies. During the “decade of manipulation”-- 2003 to 2013--20 countries, including China, manipulated their currencies in this way. The US current account deficit reached its highest levels on record during that period.Although China is not now manipulating its currency, other countries continue to do so. And there is every reason to believe that China will resume the practice when it serves its interests.
The other key driver of USD overvaluation is large net private capital inflows— purchases by foreign persons of USD securities in US markets that greatly exceed sales.Foreign private capital is attracted to the US because (a) the dollar is the world’s reserve currency and a safe store of value; and (b) because America’s securities markets are also the largest, most liquid, and most secure in terms of the rule of law. Even during the peak years of currency manipulation (2000 to 2010), this net private inflow was 3.8 times larger than the amounts of USD securities accumulated by foreign central banks. And from 2010 to 2015, average net private inflows were $150 billion per year, while foreign central bank banks were actually selling over $100 billion of US securities annually.
Whether the excessive net purchases of US assets are private or governmental, the result is the same: a dollar price that exceeds the current account-balancing equilibrium price and makes all US goods and services less competitive in both domestic and overseas markets.
Facing a large current account deficit in 1985, the Reagan administration abandoned its “benign neglect” of the dollar and negotiated the Plaza Accord. The dollar was devalued by 30 percent over the next 18 months, bringing the US current account into balance by 1991. No US administration has addressed dollar exchange rates since that time.
As of May 2017, the dollar was 25 percent overvalued (against a trade weighted basket of currencies) compared to the set of exchange rates that would bring US trade into balance. The dollar has fallen somewhat in the last year, but remains far above its trade-balancing equilibrium price.
The US Treasury Department has recognized this problem:
In general, current account surpluses among several major trading partners over the last two decades have proven both large and persistent. The global adjustment process has not worked effectively in the post-crisis era to promote a symmetric adjustment toward smaller imbalances in a manner that sustains – rather than inhibits – global growth. Nor are there signs that typical adjustment mechanisms – most notably real exchange rates and relative rates of demand growth – are currently pointing toward a narrowing of external imbalances.(5)
The United States does not have effective tools to manage this aspect of trade policy.
The Competitive Dollar for Jobs and Prosperity Act
The Competitive Dollar for Jobs and Prosperity Act (see draft bill attached) would establish an exchange rate management policy and provide tools to administer it.
The Act would charge the Board of Governors of the Federal Reserve with achieving and maintaining current account balance for the United States. It would authorize and direct the Fed to charge a variable rate fee—the Market Access Charge—on incoming capital to deter and reduce excessive inflows. It would also authorize the Fed to neutralize exchange rate manipulation by other governments through countervailing intervention in foreign exchange markets.
Specifically, the bill would:
1. Amend the Federal Reserve Act to add a third mandate—achieving and maintaining current account balance—to its two existing mandates of full employment and price stability.
2. Create an exchange rate management tool to be administered by the Fed—the Market Access Charge (MAC)—to gradually achieve a trade-balancing price for the US dollar.
1. Instruct the Fed to set and adjust the MAC, moving it higher or lower as needed, to moderate incoming capital flows to achieve current account balance
2. Allow the Fed to consider impacts on US economic output, employment, interest rates, and markets in setting and adjusting the MAC.
3. Define “covered transactions” as all foreign purchases of securities and other US assets denominated in USD.
4. Task the Treasury with administering the collection of the MAC. The MAC would be charged to purchasers and remitted to the Treasury by banks and non-financial institutions that already electronically report on these transactions under the Bank Secrecy Act and from transfer agents that already report under the Securities Exchange Act.
5. Authorize the Fed to engage in countervailing currency intervention to neutralize currency manipulation by other countries.
Questions and Answers:
Question: Is the bill compatible with international law and regulation?
Answer: The IMF has approved capital flow management tools like the MAC since 2012. The MAC would also be WTO-compliant since WTO rules do not deal with capital flows.
Question: Will reducing foreign demand for US Treasuries and other US assets raise US interest rates, stifling economic recovery?
Answer: Unlikely. The weaker dollar will increase foreign and domestic demand for US products and reduce foreign competitors’ market share in US and foreign markets. Over time—the consensus is about two years—the increase in production and investment caused by the weaker, more competitive dollar will stimulate the economy. If interest rates begin to rise before then, the Fed has powerful monetary tools, including control of the federal funds rate, open market operations, and quantitative easing, to maintain short- and long-term interest rates at target levels. Any upward pressure on rates from the MAC would be fully offset.
Question: Who developed the MAC?
Answer: The MAC was first proposed by John R. Hansen, an international economist and 30-year veteran of the World Bank. The concept and the draft bill have been developed and extensively vetted by the Coalition for a Prosperous American (CPA) as well as Joe Gagnon (Senior Fellow, Petersen Institute international Economics) and Rob Scott (Senior Economist and Director of Trade and Manufacturing Policy Research at the Economic Policy Institute).
Question: What would be the jobs and growth impact of the Act?
Answer: Since America's trade deficit is largely in manufactured goods, the jobs and economic growth that ending the deficit would bring back would initially be concentrated in manufacturing. Expansion in related services sectors and upward pressure on wages in other industries would follow.
Question: How much revenue would the Act generate?
Answer: The MAC would generate substantial revenues, well into the billions of dollars in its early years. The amount would increase as the MAC charge ramps up to start the dollar on a downward path and stabilize within a somewhat lower range when current account balance is achieved.
Question: How does the countervailing currency intervention part of the Act fit with the MAC?
Answer: When a country manipulates or devalues its currency to drive up the dollar, that action is best addressed by countering that country’s actions directly rather than increasing the MAC charge for all inflows. Using only the MAC for single country manipulation would force the MAC higher than otherwise required, penalizing “innocent bystander” countries.
Question: Would we need tariffs when the MAC is in place?
Answer: Yes. Tariffs address different problems such as trade law violations and sub-optimal composition of trade and production. For example, the US is now running a $103 billion deficit in advanced manufactured goods because of trade barriers and intellectual property theft by other countries as well as the overvalued USD. To avoid balancing trade by selling more soybeans and natural gas, while leaving much of this high tech deficit in place, tariffs are still needed alongside the MAC.
Question: Would the Act’s new current account balance mandate, coupled with the tools to pursue the mandate, complement the Fed’s existing mandates of full employment and price stability?
Answer:Yes.The Act would give the Fed the mandate to balance the current account and the tools to accomplish this by directly controlling USD exchange rates.This would allow the Fed to carry out domestic monetary and fiscal policy without offsets or interference from foreign government currency manipulation or private sector capital markets.In fact, the Act would complete the suite of tools required to effectively manage the US economy.
Question: What industries support the MAC concept?
Answer: As of April 16, 2018, trade associations representing tooling, machining, agriculture, and copper have officially supported the bill. CPA will maintain a real time list on its website.
Question: What congressional offices support the MAC concept?
Answer: 140 congressional offices, from both parties, have responded favorably in the past year. Some of these offices support tariffs and some oppose tariffs, indicating that exchange rate management could generate broader support than other trade measures.
1. Bergsten and Gagnon, “Currency Conflict and Trade Policy,” pp. 69, 72, Peterson Institute for International Economics, 2017.
2. Calculations by John R. Hansen based on data from the Treasury International Capital System.
5. Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, April 13, 2018, p. 30
Questions and Answers Regarding the Competitive Dollar for Jobs and Prosperity Act
1. Isn’t a market access charge (MAC) currency manipulation?
No. The bill would realign the US dollar, fixing misalignment. According to IMF rules (Article IV, 1-iii) countries should “avoid manipulating exchange rates…in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members.” , Currency manipulation occurs when a nation undervalues its exchange rate to block balance of payments adjustment so it can maintain or enlarge its surplus and increase its competitiveness beyond that which is justified by the free market. The MAC will act to realign the US dollar to a value that enables our balance of payments to adjust, i.e. move closer to balance. The MAC will reduce our deficit.
2.Even if the MAC is not currency manipulation, won’t other countries retaliate?
The MAC will realign the dollar against all major currencies. If countries that are running trade surpluses, like China or Germany, attempt to devalue their currencies against the dollar, they will be manipulating their currencies, according to IMF rules. The bill provides for a policy—countervailing currency intervention—to enable us to intervene directly in currency markets and counteract their efforts and move their currencies towards their fair market value. This will prevent retaliation. In fact, the mere threat that the US would intervene against their currencies will likely prevent them from trying such tactics.
3.Would this legislation make it harder for the U.S. to borrow or finance its debt?
Interest rates have been stuck at historically low levels for the past ten years because of the excessive demand for U.S. financial assets. According to many economists, including Ben Bernanke, the global economy is experiencing a “global savings glut” in which economies and investors are desperately searching for safe assets into which to place their savings. US savings exceed US investment by over $800 billlion this year (at an annual rate). While our personal savings rate is not very high (around 8%), the level of corporate savings is very high and corporations invest less in the US economy relative to profits than they once did. The graph below shows the relationship. Given the U.S. economy’s relative attractiveness to investors including high interest rates, strong stock market, stable currency and the dollar’s status as the world reserve currency, many investors have placed their savings into U.S. financial markets, raising the value of the dollar. So, if we implement the MAC to discourage foreign inflows, our dollar will become more competitive while at the same time, domestic US savings (from all sources) will be more than sufficient to finance borrowings required by government, business, and the household sector. Further, other major economies with undervalued currencies do not have a problem borrowing or financing their debt.
4.Will the MAC will hurt businesses and jobs that rely on foreign investment?
The MAC is best thought of as a speed bump—it will slow foreign purchases of financial assets, but won’t be significant enough to discourage long-term commitments of capital for direct investment in U.S.-based projects. Over the long-term, the MAC would actually incentivize more foreign direct investment rather than deter it by making US businesses more competitive internationally than they have been in decades.
5.How will the bill impact inflation?
The CPA study showed that the annual increase in inflation would be less than 1 percent a year—around 0.6 percent of additional inflation a year. The impact on inflation is limited because imports are only around 15 percent of total US spending each year, and because importers studies have shown that importers do not raise prices to offset the full change in the dollar. Internationally, countries with undervalued currencies are not facing inflation.
6.How would the MAC impact the dollar's status as the world's reserve currency?
Today the US dollar is the world’s number one reserve currency. Other currencies that are well behind the dollar but slowly increasing their share of the world’s official reserves are the euro, the yen, and the pound sterling. The MAC would speed up that process of sharing the burden of being the world’s reserve currency, but it would still be a slow process. Acting as a reserve currency is more of a burden than a benefit because it means our currency is overvalued and our industry suffers.
7.Does a MAC interfere with or violate US obligations under existing trade law or trade agreements?
Trade agreements generally do not place any requirements or limitations on management of currencies. The IMF has approved capital flow management tools like the MAC since 2012. World Trade Organization (WTO) rules prohibit a country from manipulating its currency to achieve or increase a trade surplus. The CDJPA would not violate WTO rules because it does not move the currency away from its trade balancing price.
8.How much dollar devaluation is required to balance trade?
The Coalition for a Prosperous America has estimated that a 27 percent realignment of the dollar, implemented over a period of about 5 years, would be required to balance trade. This figure is similar to estimates contained in Peterson Institute studies of the equilibrium exchange rates of all major world currencies and the realignments to some currencies that would be necessary to minimize global imbalances.
In addition to the benefits of a more competitive dollar, a new international exchange regime incorporating the Market Access Charge (MAC) will create greater predictability in the exchange markets. Instead of no clear dollar policy, the US would have a very clear policy of moving the dollar to a competitive level as measured by published data on the US trade balance. The expectation of a strong and consistent policy may accelerate the adjustment and enable the US to achieve balance even before the dollar falls by the percentage indicated by economic models.
Our trade deficit last year was $621 billion, about 3 percent of US GDP. More trade balance data is available here.
9.What Market Access Charge (MAC) rate is required to deliver balanced trade?
The initial MAC rate could be between 0.25 percent and 0.75 percent. As with domestic interest rates managed by the Federal Reserve, we expect the MAC will be moved in small increments and few times each year, in order to deliver the steady predictability optimal for managing financial markets.
10. Which industries will benefit from a lower dollar and balanced trade?
The MAC is an extremely broad-based tool for stimulating the US economy. Every industry that operates in international markets will benefit from a more competitive dollar and a better export/import balance. This includes almost all of our manufacturing industry, as well as many mineral and oil products, and agricultural commodities and food products. For many farm products, the market is global and highly competitive. Historical data shows that when the dollar falls by 1 percent, many agricultural commodity prices tend to rise by 2-3 times that change in the value of the dollar. So farmers could expect significant improvements in prices and incomes. In manufacturing, where foreign competition is often a major factor pressuring prices, revenue, profitability, and employment, a dollar devaluation will provide an advantage to US manufacturers in the US market and in export markets. In service industries like tourism and education, dollar devaluation makes US services more affordable for foreign buyers, so those industries can expect an increase in overseas customers once the MAC is implemented.
11.How would a lower dollar and balanced trade affect manufacturing employment and total employment?
The CPA study on the effects of a realigned dollar estimates that with a dollar at fair value, the economy would create 5.2 additional jobs. About 1 million of those would be manufacturing jobs. Every major sector of the economy would be positively affected, because as our tradable goods sectors grow, they would pass the benefits onto other sectors. So the economy would see job growth in manufacturing, services, mining, agriculture, and the public sector.
12. How much revenue would the Act generate?
The CPA has estimated the MAC would generate between $50 billion and $100 billion in the first years of its operation. Economist John Hansen, the original developer of the MAC concept, has put his estimate higher, at between $200 billion and $300 billion. Any of these figures would make a significant contribution to the federal Treasury, providing funds that could be used to fund other programs or reduce the federal deficit or lighten the tax burden.
It’s important to remember two things: all MAC revenue is paid by foreigners, none is paid by Americans. Secondly, MAC revenue will decline as the nation’s trade approaches balance. So MAC revenue cannot be a long-term component of the nation’s tax revenue. It would be a short-term, and potentially highly valuable, component of our tax base.
Competitive Dollar for Jobs and Prosperity Act
Title: To establish a national goal and mechanism to achieve a trade-balancing exchange rate for the United States dollar, to impose a market access charge on certain purchases of United States assets, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the “Competitive Dollar for Jobs and Prosperity Act”.
SEC. 2. FINDINGS; SENSE OF CONGRESS.
(a) Findings.—Congress makes the following findings:
(1) The strength, vitality, and stability of the United States economy and, more broadly, the effectiveness of the global trading system are critically dependent on an international monetary regime of exchange rates that respond appropriately to eliminate persistent trade surpluses or deficits by adjusting to changes in global trade and capital flows.
(2) In recent decades, the United States dollar has become persistently overvalued, in relation to its trade-balancing equilibrium rate, because of excessive foreign capital inflows from both public and private sources.
(3) Countries with persistent trade surpluses maintain or benefit from undervalued currencies over a long period of time. As a result, those countries overproduce, underconsume, and rely excessively on consumers in countries with persistent trade deficits for growth. Those countries also export their unemployment and underemployment to countries with persistent trade deficits.
(4) Countries with persistent trade deficits, including the United States, absorb the overproduction of countries with persistent trade surpluses, thereby reducing domestic wages, manufacturing output and employment, economic growth, and innovation.
(5) The United States possesses fiscal and monetary tools to pursue national economic goals for employment, production, investment, income, price stability, and productivity. However, exchange rates that do not adjust to balance international trade can frustrate achieving those goals. The United States does not have a tool to manage exchange rates in the national interest.
(b) Sense of Congress.—It is the sense of Congress that—
(1) it is consistent with the obligations of the United States as a member of the World Trade Organization and the International Monetary Fund that the United States use a capital flow management tool to move the United States dollar to its trade-balancing exchange rate; and
(2) it is in the national interest of the United States to establish exchange rate management tools to consistently achieve a trade-balancing exchange rate.
SEC. 3. DEFINITIONS.
In this Act:
(1) Covered buyer.—The term “covered buyer” means a foreign person or a person located outside the United States that purchases a United States asset in a covered transaction.
(2) Covered transaction.—The term “covered transaction” means the purchase or acquisition by a covered buyer of a United States asset the value of which exceeds $10,000.
(3) Current account balance.—The term “current account balance” means that current account deficits do not exceed an average of 0.5 percent of the gross domestic product of the United States in any five-year period.
(4) Domestic financial institution.—The term “domestic financial institution” has the meaning given that term in section 5312 of title 31, United States Code.
(5) Entity.—The term “entity” includes—
(A) a corporation, partnership, or limited liability company; or
(B) a trust or estate.
(6) Foreign person.—The term “foreign person” means any individual or entity that is not a United States person.
(7) Market access charge.—The term “market access charge” means the fee imposed under section 5 with respect to a covered transaction.
(8) Person.—The term “person” means an individual or entity.
(9) Secretary.—The term “Secretary” means the Secretary of the Treasury.
(10) Security; transfer agent.—The terms “security” and “transfer agent” have the meanings given those terms in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c).
(11) United states asset.—
(A) In general.—Except as provided in subparagraph (B), the term “United States asset” means—
(i) a security, stock, bond, note, swap, loan, or other financial instrument—
(I) the face value of which is denominated in United States dollars;
(II) that is registered or located in the United States; or
(III) that is an obligation of a United States person;
(ii) real property located in the United States;
(iii) any ownership interest in an entity that is a United States person;
(iv) intellectual property owned by a United States person; and
(v) any other asset class or transaction identified by the Board of Governors of the Federal Reserve as trading in sufficient volume to cause a risk of upward pressure on the exchange rate of the United States dollar.
(B) Exceptions.—The term “United States asset” does not include—
(i) a good being exported from the United States; or
(ii) currency or noninterest bearing deposits.
(C) Consideration by board of governors.—Not less frequently than annually, the Board of Governors shall consider whether to identify additional asset classes or transactions under subparagraph (A)(v).
(12) United states person.—The term “United States person” means—
(A) a citizen or resident of the United States; or
(B) an entity organized under the laws of the United States or any jurisdiction within the United States.
SEC. 4. EXCHANGE RATE MANAGEMENT POLICY AND MECHANISMS.
(a) Amendment to Federal Reserve Act.—Section 2A of the Federal Reserve Act (12 U.S.C. 225a) is amended—
(1) by inserting, in the section title, “and exchange rate” after Monetary;
(2) by inserting “the United States exchange rate and” after “shall maintain”; and
(3) by inserting “current account balance (as defined in section 3 of the Competitive Dollar for Jobs and Prosperity Act),” after “stable prices,”.
(b) Amendment to Federal Reserve Act.—Section 2B(a)(1)(A) of the Federal Reserve Act (12 U.S.C. 225b(a)(1)(A)) is amended by inserting “and exchange rate” after “monetary”.
(c) Exchange Rate Management Policy.—
(1) In general.—The Board of Governors of the Federal Reserve System shall establish an exchange rate management policy to achieve and maintain a current account balance.
(2) Mechanisms.—To achieve a current account balance as required by paragraph (1), the Board of Governors—
(A) shall use the market access charge imposed under section 5; and
(B) may engage in foreign exchange intervention.
SEC. 5. MARKET ACCESS CHARGE.
(a) Imposition.—On and after the date that is 180 days after the date of the enactment of this Act, there shall be imposed a market access charge on each covered buyer in a covered transaction.
(b) Calculation of Rate.—
(1) In general.—The Board of Governors of the Federal Reserve System shall establish and adjust the rate of the market access charge at a rate that—
(A) achieves a current account balance not later than  years after the date of the enactment of this Act; and
(B) maintains a current account balance thereafter.
(2) Effects of noncrisis movements.—
(A) In general.—Subject to subparagraph (B), the Board of Governors may take into consideration the minimization of disruptive effects on output, employment, interest rates, and foreign exchange, securities, and asset markets.
(B) Limitation.—The Board of Governors may not adjust the market access charge in reaction to noncrisis movements in the markets described in subparagraph (A).
(3) Alternate initial market access charge.—If, on the date that is 180 days after the date of the enactment of this Act, the Board of Governors has not established the initial rate for the market access charge, the initial market access charge shall be established at the rate of 50 basis points of the value of a covered transaction.
(c) Collection and Reporting.—
(1) In general.—The market access charge shall be collected from a covered buyer in a covered transaction as follows:
(A) In the case of a covered transaction involving a registered security, the transfer agent shall collect the market access charge.
(B) In the case of a covered transaction not involving a registered security and through which a domestic financial institution receives funds from the covered buyer, the domestic financial institution shall collect the market access charge.
(C) In the case of any covered transaction not described in subparagraph (A) or (B), the United States person that is the counterparty to the covered buyer or otherwise receives funds from the covered buyer pursuant to the covered transaction shall collect the market access charge.
(2) Transfer to treasury.—At the end of each month, each person collecting a market access charge under paragraph (1) shall transfer to the Secretary the amount of all market access charges collected by the person during that month in such manner as the Secretary may prescribe.
(3) Reporting.—The Secretary shall require each person collecting a market access charge under paragraph (1) with respect to a covered transaction to keep records and file reports with the Secretary that include, in the manner and to the extent the Secretary prescribes—
(A) the identity and address of participants in the transaction;
(B) a description of the legal capacity in which each participant in the transaction is acting;
(C) the identity of real parties in interest;
(D) a description of the transaction, including the nature of the United States asset involved and the price paid;
(E) the amount of the market access charge collected and the amount retained as a service fee pursuant to paragraph (4); and
(F) such other information as the Secretary may prescribe.
(4) Service fee.—A person collecting a market access charge under paragraph (1)(A) or (B) may retain, from the amount of the market access charge collected, a service fee, in an amount prescribed by the Secretary, to compensate the person for the administrative costs of collecting the market access charge.
(A) Transfer agents.—A transfer agent that violates the requirements of this subsection shall be subject to a penalty under section 32 of the Securities Exchange Act of 1934 (15 U.S.C. 78ff) to the same extent as if that agent violated a provision of that Act.
(B) Domestic financial institutions and other united states persons.—A domestic financial institution or other United States person that violates the requirements of this subsection shall be subject to a penalty under section 5321(a)(1) or 5322(a) of title 31, United States Code, to the same extent as if that institution violated a provision of subchapter II of chapter 53 of that title.
(d) Deposit in Treasury.—The Secretary shall deposit all amounts received under subsection (c)(2) into the general fund of the Treasury.
SEC. 6. REGULATIONS.
The Secretary shall prescribe such regulations as are necessary to carry out this Act.
By Steven L. Byers, PhD
U.S. Senators Tammy Baldwin (D-WI) and Josh Hawley (R-MO) recently introduced a bipartisan bill (Senate Bill S.2357) to realign the US dollar exchange rate to make U.S. exports more competitive, boost American manufacturers and farmers, and reduce our trade deficit. The Competitive Dollar for Jobs and Prosperity Act would manage the U.S dollar exchange rate and bring it into alignment by placing a “Market Access Charge” (MAC) on foreign purchases of U.S. stocks, bonds and other assets.
Editors’ note: This is an important and clear article by respected journalist Matthew Klein supporting the Baldwin/Hawley Competitive Dollar for Jobs and Prosperity Act. However, CPA does not want to “forget tariffs” because they are essential to address trade cheating, to conduct industrial policy to improve the composition of trade, and to address bad actor countries like China. While the current trade dispute between the U.S. and China dominates the news, America’s trade problems—with a wide range of countries—date to the early 1980s. Diplomacy and tariffs have failed repeatedly, even when negotiating with allies, and there is little reason to...
Editors note: Conservative opinion leaders are starting to focus on the need for a competitive dollar.
Senator Josh Hawley (R-Mo.) has wasted very little time in becoming one of the most important senators in this new freshman class.