Democrats urge Bush take lead on China's yuan

WASHINGTON (Reuters) - Democrats in the House of Representatives urged President George W. Bush on Thursday to ratchet up pressure on China to raise the value of its currency, in a possible sign Congress may not take action itself this year on China trade concerns.

"Now, more than ever, it is critical that the administration use all available tools at its disposal to address China's protracted, large-scale intervention in the foreign exchange markets to maintain an undervalued currency," House Ways and Means Committee Chairman Charles Rangel and 14 other committee Democrats said in a letter to Bush.

That prompted Rep. Phil English, a Republican member of the committee, to accuse panel Democrats of failing to follow through on promises to pass China trade legislation after winning control of Congress from Republicans in the November 2006 election.

"More than a full year into the tenure of the Democratic majority, the committee has yet to report a bill to deal with Chinese currency manipulation, illegal subsidies, intellectual property theft or any other pressing China-related trade issues," the Pennsylvania lawmaker said.

"While the administration should certainly exhaust every avenue to remedy and redress currency manipulation and other illegal trade practices, Congress cannot simply abrogate its fundamental responsibility to act," English said.

Last year, the Senate Finance and Banking Committees passed separate bills aimed at addressing China trade concerns. But nine months later, the full Senate still has not voted on either bill and the House Ways and Means Committee has not moved its own legislation.

WORRIES OF RETALIATION

Major U.S. business groups have lobbied hard against China legislation which they fear would invite retaliation and further damage the already-weak U.S. economy.

But many small- and medium-sized manufacturers continue to press for relief against Chinese currency practices that they believe unfairly subsidize Chinese exports.

The U.S. trade deficit with China grew in 2007 to a record $256 billion, even though the overall U.S. trade gap narrowed last year and Beijing has taken some modest steps to raise the value of the yuan.

In their letter, the Democratic lawmaker said Congress "will take action, if necessary" but the Bush administration was in the best position to address Chinese currency practices and already "has the tools it needs to do so."

Four years of "quiet diplomacy" have failed to persuade China to raise the value of its currency and it is time for tougher approach, the lawmakers said one week before Treasury Secretary Henry Paulson is to head to China for talks.

They urged Bush to use U.S. leverage within the International Monetary Fund to pressure China to move more quickly to a market-based exchange rate and to take action against Beijing at the World Trade Organization for manipulating its currency in violation of global trade rules.

The Treasury Department also should reverse longstanding practice and formally label China as a currency manipulator in an upcoming semi-annual report, the lawmakers said.

China's currency practices are a problem for both the world economy and the United States, but other countries -- particularly in Asia -- also manipulate their currency to boost exports and discourage imports, the lawmakers said.

"The administration should invite other major industrial and emerging-market economies to a special meeting to address currency misalignment and global economic imbalances," the lawmakers said, noting the 1985 Plaza Accord set a precedent for countries to take coordinated actions on currency.

(Editing by Mohammad Zargham)