Senate panel urges China action on yuan, piracy

WASHINGTON (Reuters) - China needs to act soon to strengthen its currency, stop piracy of U.S. goods, and fix other trade problems or risk damaging relations with the United States, Senate Finance Committee members said on Friday.

"Failure to adequately resolve these short-term issues ... threatens to undermine the relationship between our two countries," the panel members said in a letter to Chinese Vice Premier Wu Yi, who is leading a delegation that will be in Washington next week for high-level talks.

The letter signed by the 21 members of the Senate Finance Committee reflects the depth of concern in Congress about Chinese trade practices and the potential for legislation on that front unless Beijing takes action soon.

Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and Sen. Charles Grassley, an Iowa Republican, are already working with other senators on a bill to address concerns about Chinese trade and currency practices.

In a separate interview on PBS's Nightly Business Report, House of Representatives Ways and Means Committee Chairman Charles Rangel, a New York Democrat, expressed the frustration many members of Congress feel.

A decision by China's central bank on Friday to widen the yuan's trading band is a step in the right direction "after China has treated international standards so unfairly, manipulated their currency, dumped goods on (our) markets ... (and) stole our patents and copyrights," Rangel said.

Next week's U.S.-China Strategic Economic Dialogue "is rightly intended to focus on medium- and long-term objectives" in areas such as financial services reform, energy and innovation, the Finance Committee senators said in their letter.

But "progress in many areas has been long promised and is overdue," the panels members said.

The lawmakers urged Wu to come prepared next week to make "meaningful commitments" in a number of areas.

They placed at the top of their list the need for China to raise the value of its yuan and allow it to trade more freely in response to market forces.

Many lawmakers and manufacturers believe the yuan is undervalued by 40 percent, giving Chinese manufacturers a huge advantage in international trade.

The panel members also urged China to announce strong steps to stop piracy and counterfeiting, which costs U.S. companies billions of dollars in lost sales each year.

The committee's other short-term demands included a complete opening of China's market to U.S. beef, removal of market access barriers for U.S. environmental goods, and full implementation of the commitments China made to join the World Trade Organization in 2001.

Over the longer term, China needs to eliminate all subsidies, tax incentives and industrial polices that violates WTO rules and follow through on its pledge to open its government procurement market, the committee members said.