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U.S. Bill on China Gains Momentum

September 19, 2010

The Wall Street Journal (WSJ)
September 15, 2010

With U.S.-China tensions rising on Capitol Hill,
industry and labor groups are scrambling to shape
the one bill aimed at China's currency policy
that has a chance of success this election year.

The bipartisan bill, which has 143 co-sponsors,
would allow the U.S. to impose tariffs and other
penalties on countries that undervalue their
currency—with China a main target. Many U.S.
businesses, policy makers and economists argue
that the country keeps its currency artificially
low against the U.S. dollar, giving its exports
an unfair price advantage on the global market.

The legislation, spearheaded by Rep. Tim Ryan
(D., Ohio) and Rep. Tim Murphy (R., Pa.), was a
focus of a House Ways and Means committee hearing
Wednesday, one of three this week on China's
exchange-rate policy. Treasury Secretary Timothy
Geithner is slated to testify in two other hearings on Thursday.

China is fast becoming an election-year issue
with anger running high among voters over
continued economic weakness and high
unemployment. Many lawmakers and their
constituents blame what they view as China's
unfair trade practices, including its currency policy.

Several bills addressing China's currency policy
have emerged in Congress in recent years but have
made little headway. But both supporters and
detractors of the Ryan-Murphy bill say it could
have a real shot at passage this year.

"This is a very emotional issue for a lot of
members and there is a great deal of frustration
over whether China is playing fair," said Erin
Ennis  of the U.S.-China Business Council, a
group representing U.S. companies that do
business in China, which opposes the bill. "It
wouldn't surprise me if a measure like this would
pass as a reflection of the frustration."

Some 100 lawmakers, including 30 Republicans,
sent a letter to the House leadership on
Wednesday calling for a House vote on the bill.

Nadeam Elshami, a spokesman for House Speaker
Nancy Pelosi, said a decision on how to proceed
would be made after the hearings.

Business groups and labor unions have lined up on
both sides of the measure. The Fair Currency
Coalition—a Washington-based group representing
manufacturers, labor and farmers—which backs the
bill, has held summits to discuss the issue and
raised the subject at candidate forums.

The AFL-CIO, a coalition member, has coordinated
meetings between manufacturing executives and
members of Congress in Washington and members'
home districts. "Our goal is to have the Chinese
take our government seriously, and they
understand action. This is action," said Bob
Baugh, executive director of the AFL-CIO's industrial union council.

Meanwhile, the U.S.-China Business Council and 35
other major business groups, including the U.S.
Chamber of Commerce, sent a letter Tuesday to
House Ways and Means Committee Chairman Rep.
Sander Levin (D., Mich.) and ranking member Rep.
Dave Camp voicing opposition to the measure. The
letter contends said the bill would violate the
U.S. commitments under World Trade Organization
rules, and that in any case there are better ways
to address China's trade practices.

Prospects for similar legislation in the Senate
appear uncertain, with time tight in both
chambers. Lawmakers head back to their home
districts in October to campaign ahead of November's mid-term elections.

Terence Stewart, a Washington attorney who often
works with the United Steelworkers union on trade
cases, said another factor driving support for
the bill was the Department of Commerce's
perceived inaction on the currency issue. In the
past four years, petitioners in 12 cases alleging
China violations of both antidumping and
countervailing duty laws urged the department to
investigate whether Chinese currency policies
could be considered an illegal subsidy. In each case, the department declined.

On Wednesday, the U.S. filed two new trade cases
against China at the WTO, claiming discrimination
against U.S. steel makers and credit-card
companies. The cases target import duties that
China has imposed on electrical steel used in the
power sector, as well as restrictions in
providing electronic payment services in the country.

  The U.S. opted earlier this year not to brand
China a currency "manipulator" and instead worked
through diplomatic channels to get the Asian
giant to move to a more-flexible exchange rate.
China in June signaled that it would gradually
let its exchange rate start to reflect market
forces. The yuan has appreciated by only 1.7%
against the dollar since then, to 6.7250 yuan Wednesday.

A Treasury Department spokesperson said Mr.
Geithner shared lawmakers' concerns over China's
currency policy and sense of urgency, but "we
haven't taken a position on any proposed legislation."

* Michael Crittenden and Tom Barkley contributed to this article.
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