US discussion on China currency bill advances
Legislation that targets imports from China and other countries with currencies similarly perceived to be undervalued sailed through the U.S. House Ways and Means Committee Friday, preparing the way for a vote in the full House next week.
“I will bring this bill to the House Floor for a vote next week,” House Majority Leader Steny Hoyer (D., Md.), said in a Friday statement.
“While a multilateral approach to addressing this issue is preferable, we cannot wait any longer to level the playing field for U.S. businesses and protect American manufacturing jobs,” Mr. Hoyer said.
The Ways and Means panel passed the bill by voice vote earlier Friday. The bill authorizes punitive tariffs on goods from countries deemed to be manipulating their currency.
Although it is unclear if the Senate will take up similar legislation before the next Group of 20 summit in November, House passage would give the Obama administration negotiating leverage to push China for a faster pace of yuan appreciation.
U.S. lawmakers and administration officials have expressed increasing frustration with Beijing’s currency policy, which economists say keeps that country’s currency 20% to 40% undervalued and contributes to a monthly trade deficit of more than $40 billion. Anger has been exacerbated by the slow U.S. economic recovery, with unemployment hovering around 10%, in the midst of an election cycle.
“China’s mercantilist exchange-rate policy places a drag on U.S. economic growth and job creation…and is a major distortion in the international marketplace,” said Committee Chairman Sander Levin (D., Mich.).
Committee passage came after Rep. Dave Camp (R., Mich.), the panel’s top Republican, announced he will support it. He said he was swayed by changes Mr. Levin made to make it less vulnerable to challenge at the World Trade Organization.
Mr. Camp said he still has concerns with the bill, but he believes it now doesn’t result in “an automatic violation of our WTO obligations.”
“This is a responsible and necessary step toward addressing the persistent imbalance created by China’s undervalued currency,” Mr. Levin said at the outset of the Ways and Means Committee meeting.
Other committee Republicans, including Reps. Eric Cantor (R., Va.) and Charles Boustany (R., La.) said they were concerned that enactment of the bill would prompt China or other nations to bring suit against the U.S. at the WTO.
China in June resumed a policy of moving toward a free-floating exchange rate, but with adjustments totaling just over a percent, lawmakers say unilateral action is the only way they see to budge Beijing. China says its currency policy isn’t the major contributor to U.S. manufacturing and trade deficits.
Although the Obama administration has recently increased its criticism of China on the yuan issue as well as other trade concerns, Treasury officials have said they fear that punitive legislation will exacerbate growing tensions between the two major trade partners.
Many analysts said the legislation—if passed into law—would likely spark a trade war. That is one of the reasons why many U.S. businesses that see China’s 1.3 billion population as a significant new market fear that unilateral action by the U.S. might severely curb future profits. Those same companies say they are more concerned about Washington getting Beijing to create a more business-friendly environment, including on intellectual-property-rights enforcement and equitable access for foreign companies on government and private contracts.
Levin complains that “efforts to date have not worked to correct the imbalances.”
Specifically, the bill allows for countervailing duties available to any U.S. industry that can demonstrate “material injury” by imports from the country with the undervalued currency. It also overrides U.S. Commerce Department standards that have allowed for the dismissal of previous currency-manipulation cases.
Senate aides have suggested their chamber is unlikely to act on a bill this year.
Source: WSJ