January 17, 2011Senators threaten currency bill ahead of Hu visit
Beijing announced $600 million in deals with U.S. companies on Monday, while senior U.S. senators pressed for Congress to get tough with China over "manipulating" its currency, underlining tensions over trade issues on the eve of Chinese President Hu Jintao's arrival.
A group of senators said it was vital for the United States to pass legislation to punish China if it fails to allow its currency to rise in value rather than manage its rate, giving it an unfair advantage in global trade..
"There's no bigger step we can take to preserve the American dream and promote job creation, particularly in the manufacturing sector ... than to confront China's manipulation of its currency," Democratic Senator Charles Schumer said.
His comments were effectively a riposte to Hu, who in a written interview with The Washington Post and The Wall Street Journal on Monday, made it clear he did not accept U.S. arguments the yuan currency is undervalued.
The message to Hu is "We are fed up with your government's intransigence on currency manipulation. If you refuse to play by the same rules, we will force you to do so," Schumer said in a conference call on a proposed bill to prod China on the yuan.
China often announces trade deals at the beginning of Sino-U.S. meetings but U.S. concerns over China's huge trade surplus, a stubbornly high U.S. unemployment rate and President Barack Obama's goal to double exports -- which could be fostered by a stronger yuan -- indicate anger over the Chinese currency is likely to linger long after Hu's visit.
Any significant progress in Congress on passing a currency bill, however, may prove difficult given White House preference to negotiate and Republican leaders who have voted against it in the past.
Both the Senate and the House of Representatives would have to approve the bill, and Obama would have to sign it, for it to become law.
Congressional supporters claim wide support for the measure, but previous efforts to pass currency legislation directed at China have failed because of concerns it could trigger retaliation by Beijing, which is the biggest foreign holder of U.S. government debt.
Beijing's undervalued currency gives Chinese companies an unfair price advantage in trade and has acted like "a boot on the throat" of U.S. economic recovery, Schumer said.
CHINESE BUSINESS DELEGATION
In the interview published on Sunday by the Wall Street Journal and the Washington Post, Hu said China had taken steps toward a more flexible exchange rate policy.
But he appeared to reject a U.S. argument that Beijing let its currency appreciate faster to help rein in domestic inflationary pressure.
Meanwhile in Houston, the Chinese government began a four-day U.S. trade mission by signing six deals with undisclosed U.S. companies worth $600 million, according to Chinese state media reports.
Chinese officials and company representatives will hold similar events in Washington, Boston, Chicago, Minneapolis, Raleigh, North Carolina, and Frankfort, Kentucky.
Chinese and U.S. energy companies are expected to unveil joint agreements at a clean-energy forum hosted by the Brookings Institution on Tuesday in Washington, where Hu arrives later in the day for meetings with Obama.
Business deals worth potentially tens of billions of dollars could be announced but U.S. industry officials have been hesitant to estimate a dollar amount.
Schumer, who was joined on the call by Senators Debbie Stabenow and Robert Casey, said there was broad bipartisan support in both the Senate and the House to pass currency legislation.
The senators' bipartisan bill would require the Treasury Department to investigate "China's manipulation of its currency and actually do something about it," Schumer said.
By also allowing companies to request the Commerce Department impose duties to offset Beijing's exchange rate practices, the bill tells China "we want you to have a level playing field on trade. If you don't we're going to create it ourselves," Stabenow said.
OPEN TRADE, INVESTMENT
But John Frisbie, president of the U.S.-China Business Council, warned passing currency legislation would likely backfire on the United States by inflaming relations and opening the door to retaliation.
"It's counterproductive. It wouldn't help get to the goal of a market-oriented exchange rate," he said.
Frisbie said he hoped the two presidents would send a strong message against protectionism and the importance of maintaining open trade and investment flows.
Chinese companies are interested in investing more in the United States, but many are afraid to dive in because they fear a hostile U.S. reaction even in sectors where there should be no national security problem, Frisbie said.
Meanwhile, U.S. companies remain committed to doing business in China but have growing concerns about a number of Chinese government policies in areas ranging from government procurement to intellectual property rights, he said.
Senate Finance Committee Chairman Max Baucus, in a letter to Hu, also urged China to show "a renewed commitment" to move to a more market-oriented exchange rate and to follow through on recent commitments to fight copyright piracy by taking concrete steps to boost use of legal software.
On another issue important to the Montana Democrat, Baucus said he was disappointed that talks aimed at reopening China's market to U.S. beef have not been resolved.
"I urge these negotiations to successfully conclude as quickly as possible. International scientific standards (regarding the safety of U.S. beef) are clear, and there simply is no excuse for China's refusal to abide by them," he said.
AP
