October 11, 2011 / 6:00 PM / 6 years ago

Senate approves China yuan bill, House fate unclear

WASHINGTON (Reuters) - The U.S. Senate on Tuesday approved a controversial bill to punish China over its currency in an effort to save American jobs, sending it to the House of Representatives where its fate is uncertain.

Beijing has warned the legislation could spark a trade war but it has advanced further than similar U.S. bills in the past, reflecting frustration with China’s trade policies and lawmakers’ worries about stubbornly high unemployment going into congressional and presidential elections in 2012.

The bill would allow the U.S. government to slap countervailing duties on products from countries found to be subsidizing their exports by undervaluing their currencies.

Some U.S. lawmakers contend China’s yuan is undervalued by as much as 40 percent, giving Chinese producers an unfair advantage in international markets and costing U.S. jobs.

The Senate’s 63-35 vote puts the bill in the hands of the Republican-controlled House, which may never vote on the bill despite rank-and-file support.

House Speaker John Boehner last week said it would be “dangerous” for Congress to get involved with a foreign country’s exchange rate.

That stance prompted House Democratic Leader Nancy Pelosi to accuse Boehner of “thwarting the will of the House.”

“I call on Speaker Boehner to listen to the American people and bring this bill to the floor and allow it to receive the bipartisan vote it deserves,” she said after Tuesday’s vote.

Another top Republican, House Majority Leader Eric Cantor, said President Barack Obama should clarify his position on the bill, which has drawn warnings from Beijing. The U.S. president has neither endorsed nor rejected the bill.

“What I would like to see is where the administration is. Clearly they’ve got concerns as well,” Cantor, the No. 2 House Republican, told reporters.

Secretary of State Hillary Clinton said the fate of the bill was unclear but its message expressed the country’s mood.

“I don’t know whether this bill in the form that its passing the Senate will ever end up as a piece of legislation coming from the Congress,” Clinton told Reuters in an interview. “But it does reflect a great deal of frustration on the part of the American people.”

Democratic Senator Charles Schumer, one of the bill’s co-sponsors, said Tuesday’s vote “has put the Chinese on notice: Stop your cheating that is costing our country jobs, or you will face the consequences.”

“We believe the momentum from the Senate vote now leaves the House no choice but to act on this bill. The support is there in the House, and the Speaker should give it an up-or-down vote as soon as possible,” he added.

If the House were to pass the bill, Obama would face a dilemma. Signing it would anger China, whose cooperation the United States needs both on the economic front and in global hot spots such as North Korea and Iran.

But vetoing the bill would not play well in industrial heartland states like Ohio and Michigan, and could undercut Obama’s bid for second term.

A leading Republican presidential candidate, Mitt Romney, on Tuesday repeated his vow to crack down on China over currency on his first day in office if elected.


Many U.S. economists say China holds down the value of its yuan to give its exporters an edge in global markets. China says it is committed to gradual currency reform and notes that the yuan has risen 30 percent against the dollar since 2005.

A key provision of the Currency Exchange Rate Oversight Reform Act of 2011 would require the Commerce Department to consider whether undervalued currencies act as an effective export subsidy that justify the United States applying countervailing duties in response.

Obama, who has preferred dialogue with China to punitive measures, last week said China was “gaming” the international trade system. He has not taken a formal position on the bill and cautioned that it must be compatible with World Trade Organization rules.

Obama has not said how the legislation might run afoul of WTO rules. The authors of the legislation say trade lawyers have found that it complies.

Boehner has the power to block the bill in the House, even though its backers say it has 225 House co-sponsors, including 61 Republicans -- enough for passage if it came to a vote.

Lloyd Wood, a spokesman for the Fair Currency Coalition, said supporters would keep pressing at “the grass roots level” to demand action on the bill.

“If you can persuade enough rank-and-file Republicans, they’re going to ask leadership for a vote and at the end of the day we think that’s what’s going to happen,” Wood said.

Senator Rob Portman, an Ohio Republican and former U.S. trade negotiator, told Reuters he supported the legislation, even though he preferred the Obama administration lead a multilateral effort to pressure China to revalue the yuan.

“This is an opportunity to raise the visibility of the issue and to encourage the administration to address it more vigorously.”

China has mounted an intense lobbying effort in Washington to kill the legislation.

A 12-member “Congressional Liaison Team” inside the Chinese embassy has been meeting with aides to key lawmakers, making phone calls to congressional offices and speaking to the White House on the issue, according to Chinese and U.S. officials.

The U.S. Treasury Department faces a statutory deadline on Sunday to release a semi-annual report on whether any country is manipulating its currency for an unfair trade advantage.

In five previous reports, the Obama administration has stopped short of formally labeling China a manipulator, which would require it to pursue stepped-up negotiations aimed at getting Beijing to revalue the yuan.

Additional reporting by Thomas Ferraro, Richard Cowan, Doug Palmer, Tim Reid and Susan Cornwell; Editing by Cynthia Osterman

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