WASHINGTON (Reuters) - The Senate will try to pass legislation in coming weeks aimed at forcing China to stop holding its currency below market value, Senate Democratic Leader Harry Reid said on Tuesday.
Many U.S. lawmakers and economists say China deliberately undervalues its currency, the yuan, against the dollar to give its companies an unfair price advantage in international trade. China rejects this criticism.
“One of the things we’re going to do is Chinese currency, which is a jobs bill,” Reid told a news conference.
U.S. lawmakers have been threatening legislation since 2005 to punish Chinese exports with tariffs designed to offset the effect of China’s stockpiling of U.S. dollars to hold down the value of the yuan, also called the renminbi.
The closest any currency legislation has come to passage was last year, when the Democratic-controlled House of Representatives passed a bill, but the Senate took no action.
With Republicans now controlling the House and signaling they want to focus on other China trade issues, it is not clear Reid’s bid will succeed.
Reid’s renewed drive for a currency bill comes amid angst about stubbornly high U.S. unemployment and the huge U.S. trade deficit with China, which hit a record $273 billion in 2010 and could surpass that this year.
The yuan, which traded at around 6.4 per dollar on Tuesday, has risen about 3 percent so far this year and 6.7 percent since its depegging by the Chinese government in June 2010.
Reid said he would bring up the bill after the Senate votes on disaster aid, highway funding and legislation related to trade agreements. He said the Senate would produce a stand-alone bill with the support of opposition Republicans.
Analysts previously thought lawmakers might attach currency legislation to a trade bill as part of the process of passing U.S. free trade pacts with Colombia, Panama and South Korea.
The left wing of the Democratic Party opposes those trade pacts and Reid’s gesture could be a sop to them.
A Democratic aide said the party had not decided which of the competing currency bills from 2010 to pursue. Each of the proposed bills would make it easier for the U.S. government to take punitive action against China over the yuan.
Last year, the House passed a bill treating “undervalued currencies” as an export subsidy. It died in the Senate but would have allowed U.S. companies to seek countervailing duties on a case-by-case basis against imports that benefit from China’s currency practices.
Republican leaders who now control the House have shown little enthusiasm for China currency legislation.
Earlier on Tuesday, Representative Kevin Brady, who chairs the House Ways and Means subcommittee on trade, said it would be wrong to “punish” U.S. consumers for China’s currency practices by slapping duties on Chinese goods.
He said lawmakers “made a mistake” in the past by focusing exclusively on exchange rate concerns when there were so many other challenges in the U.S.-China trade relationship.
“China’s currency is a perennial problem and a high priority but it is not the only challenge facing us,” Brady said in a speech to the business group USA Engage.
The House Ways and Means Committee plans a hearing in “early fall” on China trade concerns, Brady said.
“We will focus on the full range of issues inhibiting U.S. companies from selling their goods and services in China, including Chinese indigenous innovation requirements, subsidized capital, directed lending policies, intellectual property theft, and restrictions on exports of key raw materials and a closed capital account,” he said.
Some Republican candidates competing to challenge President Barack Obama in the November 2012 election have also lashed out at China’s currency and trade policies.
Candidate Mitt Romney, unveiling his job creation plan last week, said on his first day as president he would “clamp down on the cheaters” by slapping duties on Chinese imports if Beijing does not move quickly to float its currency.
Reporting by Andy Sullivan and Doug Palmer; Writing by Paul Eckert; Editing by John O'Callaghan