U.S. turns down China currency probes in two cases

WASHINGTON (Reuters) - The U.S. Commerce Department decided on Tuesday not to investigate whether China subsidizes exports to the United States by undervaluing its currency, prompting renewed calls for Congress to act on the issue.

An employee counts Yuan banknotes at a branch of Industrial and Commercial Bank of China in Huaibei, Anhui August 3, 2010. REUTERS/Stringer

“It’s clear that China games the system by manipulating its currency,” Senator Sherrod Brown said in a statement after the department announced its decision in cases involving imports of coated paper and certain aluminum products from China.

“I’m disappointed that the Obama administration has yet to recognize this fact. I stand committed to addressing Chinese currency manipulation through legislation if the administration fails to act,” the Ohio Democrat said.

In both cases, U.S. industry groups argued China effectively subsidizes exports by keeping its currency at an artificially low value to the dollar and asked the department to impose countervailing duties in response.

Commerce Department officials said the petitioners failed to make their case.

“The allegations made by domestic producers do not meet the statutory standard for initiating an investigation,” Commerce Deputy Assistant Secretary Ronald Lorentzen said in a statement.

However, the department did not completely rule out the possibility of using countervailing duties against China’s exchange rate action if groups come up with a better argument.

Sander Levin, chairman of the House of Representatives Ways and Means Committee, said his panel would examine that possibility and “other courses of action” at a September 15 hearing on China’s exchange rate policy.

Meanwhile, the Commerce Department set preliminary duties ranging from 6.18 to 137.65 percent on aluminum “extrusions” from China to offset other alleged subsidies.

That decision provides relief for a group of U.S. producers, including William L Bonnell Co, Hydro Aluminum North America, Kaiser Aluminum Corp and Sapa Extrusions Inc, that have sought protection in the case.

The United States imported more than $500 million of the goods from China last year. Extruded, or molded, aluminum is widely used in the automobile and constructions industries, including in door and window frames.

A second preliminary decision on the industry’s request for additional “anti-dumping duties” is due in coming months.

Many U.S. manufacturers and lawmakers believe China’s currency is undervalued by as much as 40 percent, which they say gives Chinese companies an unfair trade advantage.

“It’s now up to Congress to pass legislation to strengthen and modernize our trade laws so that the devastating impact of currency manipulation can be factored into penalties for subsidies and dumping,” said Scott Paul, executive director of the Alliance for American Manufacturing.

Leo Gerard, president of the United Steelworkers union, accused the Commerce Department of turning a blind eye to the facts and called for Congress to “take strong action when it returns next week by providing the tools necessary to hold China accountable for its deliberate currency manipulation.”

However, the U.S. Chamber of Commerce and U.S.-China Business Council have said they oppose expanding U.S. import injury laws to cover currency because it could invite retaliation and violate World Trade Organization rules.

Under both U.S. law and WTO regulations, a subsidy is defined as a financial contribution from the government that provides a benefit to a specific industry.

Attorneys for U.S. coated paper and aluminum producers argued that since Chinese exporters, as a group, account for about 70 percent of the country’s foreign exchange transactions they receive a specific benefit.

But Lorentzen said the complaining groups failed to show benefits derived from China’s foreign exchange regime were “specific to the enterprise or industries being investigated.”

Editing by Jerry Norton