Congress set to turn up heat on China over yuan
WASHINGTON (Reuters) - The Congress on Wednesday renews a drive to pass a law aimed at forcing China to let its currency rise in value, an election-year bid by lawmakers to help American businesses and show voters they are doing something to boost the job market.
Many lawmakers accuse Beijing of deliberately undervaluing the yuan by as much as 40 percent to give Chinese exporters an unfair trade advantage that has swelled U.S. trade deficits and taken jobs from American workers.
With the U.S. unemployment rate at a lofty 9.6 percent, a tough stance on China could play well at the polls.
The House of Representatives Ways and Means Committee will launch two days of hearings on Wednesday to hear testimony from U.S. industry, trade experts and Treasury Secretary Timothy Geithner about how to make China move on the currency issue.
Geithner will appear before the panel on Thursday afternoon after delivering testimony on the same topic in the morning to the Senate Banking Committee.
Following a pattern that predates the Obama administration, Geithner has thrice declined to formally name China a currency manipulator in semiannual reports, staving off political pressure to give Beijing time to act on its own.
Beijing did move in June by loosening the yuan's peg against the dollar. But so far the yuan has risen little more than 1 percent against the U.S. dollar.
China maintains that the yuan is now market-driven and that exchange rate policy is not the way to address the bilateral trade imbalance of about $25 billion per month.
Ding Yifan, an economist at a leading Chinese state think tank, warned on Tuesday that the United States would be the loser if U.S. punitive measures against Beijing sparked a trade war.
China's stance has reignited anger in Congress before the November 2 elections. Currency, however, is just one of a host of disputes between the world's two biggest economies.
U.S. DIVISIONS OVER BILL
This year, Washington and Beijing have bickered over trade barriers, U.S. arms sales to Taiwan and sympathy for Tibet's Dalai Lama, military navigation rights in seas near China and Chinese support for Iran, North Korea and Myanmar.
Last week U.S. National Economic Council Director Larry Summers and Deputy National Security Adviser Thomas Donilon said after meeting top Chinese leaders that China wants to avoid shouting matches in favor of quiet talk to quell tensions.
Many U.S. lawmakers, however, lack patience for quiet diplomacy. Ninety-three lawmakers have signed a letter urging Democratic leaders in the House to schedule a vote on a China currency bill.
Analysts say it would be a mistake to disregard the push for legislation as just election-year saber rattling and say there is some chance a bill could finally reach the president's desk even though prior attempts at legislation fell flat.
Representative Tim Ryan, the lead Democratic sponsor of the House bill, is scheduled to testify on Wednesday.
His bill, which has 132 co-sponsors, would authorize the Commerce Department to apply anti-dumping and countervailing duties against "injurious imports" from countries with undervalued currencies.
On Tuesday, lobby groups weighed in both for and against the legislation.
"If China does not take concrete and transparent steps to allow their currency to float, the government and manufacturers must have the tools they need to defend ourselves," the Precision Metalforming Association and the National Tooling & Machining Association said in a joint statement.
But a big coalition of U.S. farm and business groups -- including the U.S.-China Business Council, the American Soybean Association and the American Meat Institute -- wrote to Ways and Means Committee Chairman Sander Levin on Tuesday urging Congress not to pass legislation.
The coalition argued that Commerce Department findings on the currency's undervaluation and related punitive duties would be subjective, would probably violate World Trade Organization rules and would anger China and threaten the fastest-growing export market for many U.S. goods and services.
Another House panel witness, economist Fred Bergsten of the Peterson Institute for International Economics, told reporters the United States should mobilize a "multilateral coalition" with European and emerging economies that share U.S. concerns over China's currency policies to take China to the WTO.
"They'll be unhappy. But remember, they're the aggressors. They're the ones who have taken protectionist actions," he told reporters in Washington when asked how China would feel about such measures.
(Additional reporting by Emily Kaiser and Doug Palmer; Editing by Dan Grebler)
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