New US lawmakers want action on Chinese currency

Associated Press

WASHINGTON

Chinese President Hu Jintao’s high-profile visit to Washington this week comes as newly elected Republican lawmakers are itching to act against what they see as an undervalued Chinese currency that is costing American jobs.

But they could run into resistance from leaders of their own party. Congress may be less likely to pass legislation on the issue than it had been last year, when both chambers were under Democratic control. A bill to give U.S. companies a means of challenging what they view as an unfair export subsidy sailed through the House but died in the Senate.

Three Democratic senators — Charles Schumer of New York, Debbie Stabenow of Michigan and Bob Casey of Pennsylvania — plan to introduce legislation this week to address the currency issue.

“The American dream is imperiled” by China, Schumer said in a conference call Monday with reporters.

If passed, the legislation would impose stiff new penalties on designated countries that misaligned currency in a way that unfairly harmed U.S. trade. Penalties would include tariffs on exports and a ban on any companies from those countries from receiving U.S. government contracts.

The new House speaker, Rep. John Boehner, voted against the bill. Rep. Dave Camp, R-Mich., the new chairman of the House Ways and Means Committee, voted in favor. But he has appeared unenthusiastic about focusing strictly on currency while ignoring trade barriers and other issues. Without the support of such senior Republicans, the bill may never reach the House floor for a vote.

Still, with unemployment at 9.4 percent and a presidential election looming in 2012, the issue won’t go away. It is a priority for many lawmakers from both parties, including some new ones from the tea- party movement that has reinvigorated the Republican Party — and isn’t afraid to challenge party leaders.

Charles Freeman, a former U.S. trade negotiator with China, was struck by the eagerness of new lawmakers to act when he participated in a recent briefing for them. “This is a crowd that is anxious to do something,” he said.

U.S. manufacturers say the Chinese government intervenes in currency markets to hold down the value of the yuan against the dollar by as much as 40 percent, making Chinese products cheaper for Americans while increasing the price of U.S. goods in China. Since China announced it would allow more flexibility in its exchange rate last June, the yuan has appreciated just 3 percent against the dollar. China’s leaders say relaxing currency controls too abruptly would damage its financial system, hurt its exporters and wipe out Chinese jobs.

Ahead of his visit, Hu said in written responses to questions from The Washington Post and Wall Street Journal that China has adopted a “managed floating exchange-rate regime” determined by the balance of international payments and supply and demand. He gave no indication that a major shift in the exchange rate was imminent.

Currency is just one of many critical aspects of the U.S.-China relationship. The economies of the two giants are deeply intertwined. Trade between them is worth $400 billion, up from around $100 million 30 years ago when the U.S. formalized diplomatic relations with the communist government. The U.S. relies on China’s purchase of Treasury securities to help breach the yawning budget deficit.