Senate Passes Bill to Offset China's Undervalued Currency
Oct. 11 (Bloomberg) -- The U.S. Senate passed legislation letting companies seek duties to compensate for a weak Chinese yuan, putting pressure on House Speaker John Boehner to take up a bill he has called "dangerous."
The Senate voted 63-35 today to approve the measure backed by Democrats such as Senators Sherrod Brown of Ohio and Charles Schumer of New York and Republicans including Lindsey Graham of South Carolina and Jeff Sessions of Alabama.
China's leaders and Washington opponents such as Boehner and the U.S. Chamber of Commerce have said the measure risks starting a trade war. Senate passage will lead to demands that Boehner permit a House vote on the bill, according to Michael Moore, an economist in the Bush administration.
"Boehner would really push hard to not be backed into that," Moore, a professor at George Washington University in Washington, said in an interview. "It would never be good for the Speaker to be pushed into a vote that he doesn't want to take."
The Senate bill mandates that the Treasury Department identify misaligned currencies, instead of deciding whether a currency was manipulated, as is now required. Governments that undervalue their currencies and don't take corrective action would face penalties, including increased dumping duties, a ban on federal procurement in the U.S. and ineligibility to receive financing form the Overseas Private Investment Corporation.
Schumer, who has proposed similar measures on China's currency over the past six years, failed in his previous attempts to get an up-or-down Senate vote on a bill.
'Clocks Cleaned'
"To those who say it'll cause a trade war, we are in a trade war," Schumer said in a speech on the Senate floor Oct. 6. "We have our clocks cleaned every day and lose jobs every day because of unfair Chinese practices. To those who say China will retaliate, China has got far more to lose in this than we do."
The measure may stall in the House Ways and Means Committee, which controls trade legislation in its chamber. Representative Dave Camp, the Michigan Republican who heads the panel, hasn't committed to supporting the bill even though he voted for a similar measure last year backed by Representative Sander Levin of Michigan, top Democrat on the committee.
"While currency is certainly an issue, solely looking at currency manipulation misses the larger points," spokesman Jim Billimoria said last week in an e-mail. Camp "will begin looking aggressively at China's abuses this fall."
'Very Difficult'
Boehner, an Ohio Republican, and Senate Majority Leader Eric Cantor of Virginia voted against Levin's bill last year.
"To force the Chinese to do what is arguably very difficult to do I think is wrong, it's dangerous," Boehner said Oct. 6 at the Washington Ideas Forum, sponsored by Atlantic magazine and the Aspen Institute. ���Given the economic uncertainty around the world, it's just very dangerous and we should not be engaged in this.
''I frankly think the president agrees with me but why isn't the president speaking out?" Boehner said. "Is he too busy campaigning?"
President Barack Obama said at a news conference the same day that while "China has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States," he wants to avoid laws that "are symbolic, knowing that they're probably not going to be upheld by the World Trade Organization."
Levin has said that the House version of the legislation had 225 supporters and urged Boehner to let members vote.
Momentum 'Increasing'
"It's clear to me momentum is very much increasing," he told reporters today in Washington before the vote. "The pressure will mount here in the House to act."
Representative Mark Critz, a Pennsylvania Democrat who backs Levin's bill, sought in July to force a vote against the wishes of Republican leaders. He rounded up more than 173 House members, mostly Democrats, to sign a petition that would bring the measure to the floor. It needs at least 218 signatures, a majority, to succeed.
The yuan has appreciated 4.6 percent against the U.S. dollar in the past year and 24 percent in the past five years, the steepest advance among 25 emerging-market currencies tracked by Bloomberg. China limits currency conversions for investment purposes and buys dollars to slow the yuan's advance and preserve the competitiveness of China's exports.
Senate passage alone "is not enough to put us into the danger of a trade war," Moore said.
"The administration, U.S. trade officials, Treasury could say to the Chinese 'This is just posturing' if it's only the Senate," he said. "For it to really be problematic, both of them need to pass it."
The bill is S. 1619.
To contact the reporters on this story: Eric Martin in Washington at emartin21@bloomberg.net William McQuillen in Washington at bmcquillen@bloomberg.net
To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net
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