U.S. groups urge Congress reject China currency bill

Arrangement of various world currencies including Chinese Yuan, US Dollar and Euro pictured in Warsaw, January 25, 2011

WASHINGTON (Reuters) - A coalition of 45 U.S. business groups on Friday urged lawmakers to reject a renewed push for legislation to pressure China to raise the value of its currency against the dollar.

"We agree that China needs a yuan exchange rate that responds to trade flows and that China should move steadily toward a market-determined exchange rate," the U.S.-China Business Council and other groups said in a letter to every voting member of Congress.

But passing legislation threatening to slap tariffs on some Chinese goods "would be counterproductive not only to the goals related to China's exchange rate that we all share, but also to our nation's broader goals of addressing the many and growing challenges that we face in China," the groups said.

Those include inadequate protection of intellectual property, restrictions on market access, the need for financial services liberalization, restrictions on the export of commodities such as rare earths, discriminatory indigenous innovation and other industrial policies, the groups said.

The coalition includes leading business organizations such as the U.S. Chamber of Commerce, the Business Roundtable and the National Foreign Trade Council, many of whose members have invested heavily in China or export products there.

They said they feared China could retaliate against U.S. exports if Congress passed the currency bill.

China's tightly managed exchange rate policies have long been an irritant in bilateral trade relations.

One year ago, China loosened its yuan from a peg to the dollar and it has risen 5.46 percent since then. However, U.S. lawmakers complain the pace of appreciation remains too slow, leaving the currency significantly undervalued.

Last year, the House of Representatives, by a vote of 348-79, passed legislation to treat undervalued currencies as a subsidy under U.S. trade law and allow companies to seek countervailing duties on a case-by-case basis.

The bill died in the Senate, but Democratic Representative Sander Levin has reintroduced it this year in the House and already has 160 co-sponsors.

Democrats are also circulating a "discharge petition" to force House Republican leaders to schedule a vote on the bill.

Senator Charles Schumer, a longtime critic of China's currency policies, has indicated he plans to pursue a currency bill in the Senate.

Many U.S. manufacturers, especially in the textile and steel sectors, which compete directly against imports from China, strongly support currency legislation.

"If Congress wants to cut the ranks of the unemployed, it must stop job-destroying foreign export subsidies like currency manipulation that offshores so many U.S. middle-class jobs to China and elsewhere," the Fair Currency Coalition of manufacturing and labor groups said earlier this week.

(Reporting by Doug Palmer; editing by Mohammad Zargham)