Senate to take up China currency bill next week

WASHINGTON Tue Sep 27, 2011 4:50pm EDT

U.S. Senate Majority Leader Harry Reid (D-NV) (C) talks to reporters about the Senate's vote on debt ceiling legislation at the U.S. Capitol in Washington, August 2, 2011. REUTERS/Jonathan Ernst)

U.S. Senate Majority Leader Harry Reid (D-NV) (C) talks to reporters about the Senate's vote on debt ceiling legislation at the U.S. Capitol in Washington, August 2, 2011.

Credit: Reuters/Jonathan Ernst)

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WASHINGTON (Reuters) - Senate plans to vote next week on legislation to crack down on China's currency practices, despite concerns that could heighten trade tensions and further threaten global economic growth.

Senate Majority Leader Harry Reid said he planned to bring up the legislation next week when lawmakers return from a break.

"I don't think there is anything more important (as a) jobs measure than China trade. That is what we are going to work on next week," Reid told reporters on Monday, saying the measure had support from both Republicans and Democrats.

"I feel very confident that we are going to pass it," Reid said.

A key provision of the Senate bill would instruct the Commerce Department to treat undervalued currencies as a subsidy under U.S. trade law, allowing companies to ask for countervailing duties against imports on a case-by-case basis.

The Congressional Budget Office estimated a similar measure passed last year by the House of Representatives would collect about $125 million in new tariff revenues over ten years, based on its conclusion that a "small share" of imports from China and other countries would qualify for the relief.

Opponents acknowledge Reid probably has the votes to pass the legislation, but hope House Republican leaders will prevent the bill from reaching President Barack Obama's desk by refusing to bring it up for a vote.

However, with Republican presidential candidate Mitt Romney promising to get tough on China currency from his first day in office, "momentum seems to be building with U.S. politicians to send a message to China," one U.S. industry aide said.

The Obama administration has so far declined to comment on the bill, which Senators Charles Schumer, Sherrod Brown and other Democrats and Republicans unveiled last week.


The lawmakers argued China's currency is undervalued by as much as 25 percent to 40 percent against the U.S. dollar, giving Chinese companies an unfair price advantage and destroying millions of American jobs.

China rejects the criticism and last week a Chinese foreign ministry official urged the United States to "not politicize the renminbi's exchange rate because of U.S. domestic economic problems."

Renminbi is the formal name for China's currency, which is also called the yuan. It has risen about 3 percent in value so far this year and 6.7 percent since its peg to the dollar was loosened in June 2010.

Still, policymakers are already worried Europe's debt crisis could undermine global growth. A trade war between the United States and China would be more trouble.

However, current House Republican leaders have not been anxious to pursue China currency legislation.

The Senate will hold a procedural vote on Monday to clear the way for action on the bill. Lawmakers hope to finish the Senate's work on the bill by the end of the week.

Meanwhile, the Treasury Department faces an October 15 deadline for its semi-annual report on whether any country is manipulating its currency for an unfair trade advantage.

In five previous reports, the Obama administration has urged China to move faster to revalue its currency but has declined to label it a currency manipulator.

The Senate bill would require the Treasury Department to identify countries with "fundamentally misaligned" currency, a less incendiary designation.

If past behavior is any guide, the Treasury Department likely will delay its upcoming currency report until after the Group of 20 and Asia Pacific Economic Cooperation summit meetings in the first two weeks of November.

High-level bilateral talks known as the U.S.-China Joint Commission on Commerce and Trade are also expected in early November.

(Additional reporting by Thomas Ferraro; Editing by Vicki Allen and Jackie Frank)

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Comments (4)
Jeanmichel wrote:
One point which the US Senators should take into account is that the effects of the appreciation of the Chinese currency are more widespread than they think.

According to the US, an appreciation of the Chinese Yuan would increase the prices of the export products which the US import from China. This would lead to a decrease in the trade deficit of US with China.

However, this is not the end of the story. First, the Chinese Yuan has been appreciating slowly but steadily for the last twelve months. Though the trade gap with China has narrowed, the trade deficit of the US with Germany has increased so that the overall trade deficit of the US has not decreased and jobs in the US has remained as scarce as before.

Second, the increase in the prices of the export products of China resulting from an appreciation of the Yuan affects also all other countries. Indeed, an appreciation of the Chinese Yuan increases the prices of Chinese products which the other countries import from China and this in turn increases their inflation rate and damp down their economic growth rates. This in turn leads to debts crises. This is why countries such as Greece, Spain, Portugal and Italy are experiencing debts problems and such debts problems will in turn affect the US economy.

The US Senators must think twice before they take inconsiderate measures. If the Chinese Yuan were to appreciate abruptly, the World’s economy would be in chaos.

Sep 27, 2011 5:07pm EDT  --  Report as abuse
Kailim wrote:
Agree with Jeanmichel.

Pushing for appreciation of yuan or imposing duty on goods imported from China can never bring jobs back to America. Because simply American CEOs should act for the benefits of their shareholders and should keep their corporations competitive. They would outsource somewhere else.

The immediate effect is inflation. That would affect at once millions of ordinally low-wage Americans having to encounter increase prices of daily consumed commodities at this time of economic difficulty and uncertainty.

American politicians should learn to become pragmatic. Naive finger pointing will cause only hostile confrontations and cannot heal the present choatic economy. Their government still need to borrow, by selling their T bonds, from the hard working Chinese for keeping it afloat.

Sep 27, 2011 10:31pm EDT  --  Report as abuse
fromthecenter wrote:
This wont change anything, it certainly wont bring jobs back. If they really want to push for something, how about asking the chinese government to let their citizens purchase american products? Currently they tax them so high that it is cheaper for a chinese girl to buy makeup in California then in Beijing. Also, how about making them pay for CD’s and DVD’s. They are allowed to download anything and everything without impunity. Most of which would be exports from this country. There is much more then wage differences causing the trade imbalances.

Sep 28, 2011 1:46am EDT  --  Report as abuse
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