The U.S. Senate passed
legislation punishing China for its undervalued currency as
opposition from House Speaker John Boehner casts
doubt on whether the measure will become law.
The Senate voted 63-35 yesterday for 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 letting U.S.
companies seek duties on Chinese goods to offset the weak yuan
risks starting a trade war. Senate passage put the focus on
Boehner.
“By passing by a large majority, maybe they think they will be
able to intimidate Boehner into a vote,” Nicholas Lardy,
senior fellow at the Peterson Institute for International Economics
in Washington, said in
an interview.
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 from the
Overseas Private Investment Corporation.
“We are very supportive of the objectives of that bill, which is
to try to make sure there’s a level playing field around the world,
that countries can’t keep their currencies weak at the expense of
American exporters,” Treasury Secretary Timothy F.
Geithner said yesterday on Bloomberg Television. “We have been
pushing very, very hard to get China to move.”
Geithner said that while China’s currency has appreciated 10
percent in real terms since the middle of 2010, the Obama
administration wants the Chinese government to allow a bigger
rally.
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.
“We are in trade war,” Brown said in a statement following the
vote. “We’re fighting back with one of the biggest bipartisan jobs
bill the Senate has seen this year,”
Opponents say they worry that protectionism and trade conflicts
may stall a global economic recovery already weighed down by the
slumping U.S. housing market and Europe’s sovereign debt
crisis. The legislation is opposed by business groups, such as the
Chamber of Commerce, that say it may cause a trade dispute.
The current policy “may be good for this company or that
company, but it is not good for America,” Sessions said on the
floor before the vote. “It’s got to stop.”
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.”
Boehner, an Ohio Republican, and House
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 the 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.
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.
‘‘It’s clear to me momentum is very much increasing,’’ he told
reporters yesterday 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 after Colombia’s peso 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.
Even if the bill becomes a law, it could take years for it to
have any substantive effect in the U.S., Lardy said. Between filing
complaints and conducting investigations, companies wouldn’t get
any immediate relief, he said.
‘‘I would think it would take years before you saw any sort of
microeconomic effect,” Lardy said. “I don’t think it would reach
its objective, it might not make any difference for a long
time.”
The bill is S. 1619.
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troublemakers? keep blaming others except themselves for
their woes.