THE US Congress moved closer to punishing China for allegedly manipulating its currency yesterday, as a key committee of the House of Representatives voted to advance legislation that could heighten economic tensions between Washington and Beijing.
The Ways and Means Committee, which has jurisdiction over trade, approved the currency Bill yesterday with bipartisan support, paving the way for a vote in the full House next week.
The legislation would allow the US to use estimates of currency undervaluation to calculate countervailing duties on imports from China and other countries.
The language of the Bill was recently changed to reduce its chances of being successfully challenged at the World Trade Organisation (WTO), making it more palatable to centrist Democrats and some Republicans, even though there are still concerns that it may not pass muster with global trade rules.
Dave Camp, the senior Republican on the committee, backed the legislation, saying it would “send a clear signal to China that Congress’s patience is running out” and would not automatically violate US obligations under the WTO, contrary to the original draft.
Even after it passes the House, the legislation faces big hurdles before enactment, since it will need to be approved by the Senate, where its fate is unclear, and to be signed by president Barack Obama.
China’s currency policy took centre stage in a meeting between Mr Obama and Wen Jiabao, Chinese prime minister, at the UN this week.
Mr Obama urged China to allow the renminbi to appreciate, calling this the “most important issue” at the talks, say US administration officials. Still, the US has not taken a position on the specific language of the bill in the House.
Meanwhile, China is resisting the pressure, with Mr Wen saying that economic conditions for a significant revaluation do not exist, since such a move could trigger big job losses in his country.
Supporters of a more lenient US approach to China’s currency policy, based on negotiations and persuasion, criticised Friday’s vote in Congress.
“The tariff legislation passed today is counterproductive to getting China to move more quickly toward a market-influenced exchange rate, and it has little chance of significantly reducing the trade deficit or creating jobs in the United States,” said John Frisbie, president of the US-China Business Council in Washington.
Opponents of this stance say it has not yielded sufficient results over the years, and have expressed backing for the congressional move. – (Copyright The Financial TimesLimited 2010)
